It’s no surprise that there’s been bubble talk in the daily deal industry.
Like the cool new kid at school (Mean Girls, anyone?), the e-commerce evolution of the coupon (i.e. the Groupons and LivingSocials of today) has sparked a ton of venture funding interest and generated a lot of industry speculation. As daily deals companies build scale and expand reach, they are finding support from the investor community in droves. Some say this financial interest will dissipate when consumers start getting bored, the novelty wears off, the services reach a saturation point and profits suddenly dry up. Daily Deal Media sees no signs of the market slowing down as an increasing number of sites test the market, helped by low barriers to entry.
But don’t call it a bubble yet.
Despite the startup action in this industry, of the 270 daily deal companies tracked, only 34 companies have received funding from the investor community. This underscores the growing investor caution in identifying daily deal companies that offer real potential for market adoption, growth and returns. The low barrier to entry and heavy competition are two major concerns cited by investors.
The 10 largest investments of the past six months include:
Globally, there are more than 3,000 daily deal companies, including roughly 1,000 in China, 900 in Europe and 600 in South America.
Investment amounts have ranged from the low seven-figure range to multi-million dollar deals, with Groupon’s $950 million round in January being the largest single-round funding to date. The top five companies in the space — which include Living Social, Gilt Groupe, Angie’s List and Ideelli — together have garnered over $2.1 billion and approximately 90 percent of the investments in the industry. Within this set, Groupon and LivingSocial have together garnered more than 72 percent of the funding.
The results we have seen in this index illustrate the explosion of this market, with the number of daily deal companies growing five-fold in the past year. Despite a conservative approach from many investors, daily deals companies are finding support from the investor community as they build scale and expand reach, and we expect this to continue for the foreseeable future.
Results of Daily Deal Media’s report on the space will be discussed at the 2011 Daily Deal Media Conference, the premier industry event for companies and investors in the Daily Deal market. The conference will be held September 8-9 in Chicago. VentureBeat readers click here and use discount code “vb2011” for a 15% discount.