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Is Group-Buying a Fad or a Reality?

A decade after its inauspicious debut, group-buying has become all the rage. GroupOn is worth a gazillion dollars and rejecting multi-billion takeover offers from Google, while LivingSocial is looking to raise $400-million. At the same time, a slew of group-buying services seem to be popping up here, there and everywhere.

It begs the question of whether consumers have discovered a new religion or whether group-buying is a fad that will be here today and gone tomorrow.

Before everyone dismisses the fad thesis, it is important to remember consumers like new and shiny as much as they enjoy good deals. But does group-buying have staying power? Once the novelty has worn off, does group-buying have enough to keep people engaged? Personally, the daily e-mails from GroupOn got tiring so I unsubscribed. The deals looked good but most of them weren’t relevant or didn’t seem worth the effort to buy them.

Perhaps the suggestion group-buying is a fad is overly dramatic but there is no doubt the market is over-heated, frothy and saturated with players looking for easy money. Maybe GroupOn and LivingSocial have staying power and maybe they’re worth their current valuations but the shininess of the group-buying marketplace is going to lose its lustre soon.

In the name fairness, here’s an interesting chart from ForeSee Results, which showed, by far, U.S. consumers prefer to hear about deals via e-mail, while social media services rank near the bottom, which is not surprising given social media is a soft sell landscape.

More: Here’s an interesting article in WebProNews asking whether GroupOn has peaked.

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  • Brian Sullivan

    I would go further than calling it fad. I think it is a scam. As more and more companies try to get on an apparent gold rush the whole thing will get scammier and spammier and collapse under its own weight.

  • Jill Kenney

    Mark, I think group-buying is here to stay, I just think it has to be refined. This sentence from your post: “The deals looked good but most of them weren’t relevant or didn’t seem worth the effort to buy them.” I believe is the main point group-buying sites have to address.

    If they could target their deals not just by region, but also by interests it would be much more successful in terms of first time and repeat buyers. For example maybe each week a Groupon subscriber could check off they items they are looking for – cars, hairdresseres, hotels, whatever – and only those deals were pushed to them.

    Just a thought…

  • Duncan Stewart

    Mark,

    One interesting datapoint is that it is unclear just how big group buying revenues really are. When GroupOn claims a billion dollars in revenues…is this before or after GroupOn has paid the retailiers? If before, GroupOn (or any group buying platform) is only about half as big as many think.

    Duncan

    • http://www.markevanstech.com Mark Evans

      Duncan,

      That’s what I wondered about as well. I suspect GroupOn’s margins must be very healthy.

      Mark