According to a story by Stu Woo and Geoffrey A. Fowler at wsjcom, consumers are now spending more time researching products online before they buy them in stores. This gives tech companies new opportunities to take a cut of the brick-and-mortar action. "The deal format is an easy one for consumers and merchants to understand and drive traffic," said Stephanie Tilenius, vice president of commerce and payments at Google, which earlier this month started testing daily deals in Portland, Ore.
Whether the daily-deal model is sustainable remains unclear. Chicago-based Groupon said in its IPO filing that it had a loss of $413 million on revenue of $713 million in 2010 as the company aggressively ramped up hiring.
Margins for daily-deal sites could also shrink because of increased competition. Groupon has traditionally taken 50% of the revenue from the deals it sells on its site, but it might have to take less as Facebook, Google and others ramp up their services, said David Sinsky, data product manager for Yipit, a website that aggregates daily deals.
Patrick Albus, chief executive of kgbdeals U.S., said his company's average margins haven't declined. "Fair revenue splits are definitely sustainable for the kgbdeals business model, and many of our repeat merchants agree with us," he said.
Analysts caution that there are also few incentives for businesses or customers to use one daily-deal service over another. If the same deal is offered on several sites, consumers have little incentive to choose one site for another. Many of the deals sites say their greatest asset is their brand name and their ability to control the quality of their offers.
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