This Week In Private Shares Trading

The Facebook auction that took place on Wednesday cleared at a price of $31.25, flat versus last week, and implying a value of $77.2 billion.

Facebook had traded at its high of $31.50 for four straight weeks, beginning on March 9th, before moving down slightly.  The high price of $31.50 implied a value of $77.8 billion.

Figure 1: Facebook Shares Trading at $31.25, Implying a Value of Just over $77 BN

Source: Company data, Wedbush Securities, Inc.


More Mobile & More Social Gaming

Guest Post by Todd Marks, CEO viaPlace

Historically, games were always a social activity.  This began to shift in the 1970s, when arcade games became prevalent and with the introduction of PCs and game consoles, game play became a largely an individual experience.

Today, powered by technology advances and prevalence of social websites like Facebook, digital gaming is reintroducing the social experience into gaming and masses are embracing the shift.  AdWeek’s Mike Shields recently posited that the widespread adoption of social gaming is behind the demise of the soap opera, noting, “When Zynga… arrived on the scene in 2007, both All My Children and One Life to Live were averaging a 1.9 rating among women 25-54.  By 2011 the two shows were averaging 1.3 and 1.4 ratings respectively in that key viewer group. The drop is even steeper for other demographics.”

The newest trend is that digital social gaming allows users to digitize traditional games from the physical world and enhance the social nature of the games by leveraging mobile devices.

Our company, viaPlace, has built a framework to deliver Location Based Services, Augmented Reality, and Social Gaming to mobile applications.  We recently released “TAG”, a game of elimination that has traditionally been played across college campuses using low-tech devices like water guns. Players compete to find and “tag” assassination targets until there is only one player remaining. viaPlace transformed “TAG” into a high-tech game leveraging mobile devices using their digital cameras for the “tag shot.”

Within the game, players also utilize the foursquare check-in API to broadcast their current location at set intervals to help assassins hone in on their targets.  However, this is not just used to seek out potential Targets to “tag.”  By using a Game Wall that aggregates all player activity, locations and comments, TAG increases social engagement across all players both within the game, and in the real world.


Figure 1: Smartphone Usage Leading to a Revolution in Social Gaming

Source: viaPlace


The thirst for social mobile gaming is evident in the growing popularity of mobile games and of the platforms that support them.

Flurry, a mobile application analytics engine, reported in February that 26 million unique users play social mobile games more than 25 minutes a day on average.


Figure 2: Games Dominate iPad Apps

Source: Flurry


Additionally, mobile gaming networks such as OpenFeint enhance mobile games by providing social components via leaderboards and connecting gamers over the Internet.  Last month the network surpassed 73 million registered users, adding new users at a rate of over 4 million per month.  The company currently has over 4,000 combined titles for iPhone and Android including some of the best-selling mobile games of all time, such as Rovio’s Angry Birds which alone recently crossed 100 million downloads.

The biggest reason social gaming has leapt to mobile platforms is because the technology is finally there to support it, providing a better experience than the previous platforms.  Smartphones, in addition to mobile Internet connectivity, now include capabilities such as Augmented Reality, Location Based Services, Near Field Communication, Face Time Communication and Gyroscopic Everything, which have opened the door to a host of newer and cooler games users can play.   Eric Schmidt, Google’s former CEO, recently pointed out that Smartphone utilities are “Augmenting Humanity” with global mobile traffic growing 260% in 2010.

– Guest Post by Todd Marks, CEO viaPlace


This Week in Social Gaming

From the time we began tracking the social gaming sector in April 2010, the three largest developers in terms of aggregate MAUS have remained at the top.  Zynga has extended its lead growing users 7% since we began tracking in April 2010.  We also note, two weeks ago, John Schappert, left his position as COO of Electronic Arts to join Zynga.  Schappert had been at EA since June 2009.

Of the developers, Wooga has made the most significant increases, growing another 25% from last month and ascending to the fourth spot powered by the success of Bubble Island, Monster World, and Diamond Dash.

Figure 1: Change in MAUs Since April 2010 for the Top 10 Facebook Game Developers

Source: Wedbush Securities,  appdata

Of the top ten titles, Zynga has developed seven with its Cityville capturing almost twice as many active users as the number two title, Zynga’s Farmville.

Figure 2: Zynga Boasts 7 of top 10 Gaming Titles

Source: Wedbush Securities, appdata


Another notable occurrence in the Facebook app ecosystem is the emergence of the dating app by Badoo as the second biggest application on the Facebook platform, with over 57 million monthly active users (MAUs).  When Badoo ascended to the number two spot last month, passing Farmville in terms of MAUs, it became the first time in over a year that Zynga apps didn’t control the top two spots.

Badoo was on a trajectory to likely surpass Cityville and become Facebook’s largest app had Facebook not worked with Badoo to alter some of the more viral elements of the app.


Figure 3: Badoo Dominates Non-Gaming Apps

Source: appdata


RENREN IPO 30 Times Oversubscribed


On Wednesday May 4, China-based social networking company Renren IPO’d to raise almost $750 million.  The IPO was priced at the high end of the range at $14 ($12 to $14), after the price range was revised 30% higher a week earlier due to high demand.


Renren’s net revenues were $76.5 million in 2010, up 64% from $46.7 million in 2009 and up from $13.8 million in 2008.  Renren had a net loss in 2010 of $64.1 million, down from $70.1 million in 2009.  The IPO valued Renren at $5.5 billion, or 67 times 2010 net revenues (Goldman Sachs-Facebook funding was priced at 25 times estimated 2010 revenues), and we estimate that the IPO pricing valued Renren between 20 to 25 times 2012 revenues.


The Renren book was 30 times oversubscribed, and even after the resignation of the head of the audit committee and revision of its unique user numbers leading up to the offering, the book held together with very few accounts dropping out.  Based on the tremendous amount of demand, the allocations had to be limited to many accounts.  We note that 3 to 4 times covered is typically considered a good deal and recent Chinese IPOs have been 10x covered


Money has poured into Chinese Internet companies as the country is currently adding 10 million Internet users every month to a current Internet user base of 457 million (still only 34% penetration).  In addition to this massive user base, China’s online advertising market is growing rapidly with estimates that it will triple to almost $13 billion by 2014 (roughly 14% of the global online revenue estimate).  In addition to the growing digital advertising opportunity, China’s social gaming market is thriving with an estimated gamer population in excess of 300 million, producing revenue of $4 billion (roughly double the U.S. market).


Figure 1: China’s Online Ad Market Expected to Triple by 2014

Source: Renren via Mashable


Figure 2: Chinese Second Internet Landscape — Chinese Internet Companies & Their U.S. Counterparts

Source: Ogilvy




Sponsored Stories – You’re the “Mad Men” now

Guest Post by Erik Ober, Founder & CEO Booshaka

In January, Facebook quietly released what might become the most innovative and effective advertising product of all time — Sponsored Stories.  The new ad unit converts a user’s activity, such as “Liking” a page or using an app, into an interactive sidebar placement that can be promoted to a user’s friend network.  Essentially, Facebook has developed a way to turn its inventory of Facebook postings into word of mouth recommendations and trusted referrals ─ the holy grail of organic, bottom-up marketing.


What’s the power of Sponsored Stories?  It’s the trusted source ─ your friends, your social graph.  I’ll give you a personal example.  A month ago, I saw a Sponsored Story ad that promoted my best friend’s purchase of a 50% off Groupon to a pizza shop down the street from where I live.  I immediately clicked through and bought the same deal.  I never click on ads and I never spontaneously purchase anything.


While Facebook reported that its internal tests showed increased brand lift, engagement and ad recall, there wasn’t any conclusive evidence of how much better Sponsored Stories performed than standard ad units ─ until now.  TBD Digital, an Ads API service provider, recently revealed that in a 10 day, 3 client, 2 billion impression test, Facebook’s new Sponsored Stories ad units received a 46% higher click-through rate, a 20% lower cost per click, and an 18% lower cost per fan than Facebook’s standard ad units.


Figure 1: Sponsored Stories Yielded a 46% Higher CTR, a 20% Lower CPC and an 18% Lower Cost per Fan

Source: TPD Digital


Even in its early stages, the data indicates that Sponsored Stories deliver a significant increase in effectiveness and engagement.  For the first time, Facebook has an ad product that takes full advantage of the platform’s inherent strength – the social graph – to offer a format that is absolutely unique and unavailable in traditional search and display.


For brands, the one major constraint to utilizing Sponsored Stories is that consumer expression determines the available inventory to serve these high performing personal endorsements.  Marketers are taking notice of this transformative shift.  Joe Tripodi, CMO of Coca Cola, recently wrote, “Impressions only tell advertisers the raw size of the audience.  By definition, impressions are passive.  They give us no real sense of engagement, and consumer engagement with our brands is ultimately what we’re striving to achieve.  Awareness is fine, but advocacy will take your business to the next level.”


It has never been more important that your brand is part of the conversation and at Booshaka, we help brands and businesses optimize consumer engagement and advocacy on Facebook.  We rank and classify fan activity on Facebook Pages so that fans can be recognized and rewarded for their contributions.  One of our customers, OneHope Wine, recently tripled the level of engagement and advocacy on their Facebook Page over a period of one month using the Booshaka platform.  Our customers use Booshaka to cultivate this inventory and make sense of it.


To date, we’ve indexed 1.5 million Facebook Pages and 70 million unique Facebook Users.  We only process a percentage of those Pages regularly but we’re tracking over 50 million daily public interactions that could potentially be leveraged for targeting and Sponsored Stories.  By our estimation, there is at least a daily total inventory of 20 billion stories to be promoted.


Social advertising is already a big business and we expect that it will grow rapidly in the years to come.  As the Facebook Platform continues to extend its reach through the rest of the web via API integrations and social plugins, the rumored introduction of an off-site Facebook Ad Product is only a matter of time.


Due to the high performance of Sponsored Stories, we will see a transformation in which publishers switch from Google and other ad networks to try the new format.  From our vantage point, Facebook looks to dominate the online display-advertising market as it balloons to a $100 billion annual opportunity over the next several years.


– Guest Post by Erik Ober, Founder & CEO Booshaka



Facebook Advertising Embracing the Second Internet Ethos


The Unilever campaign is an example of brands increasing experimentation with and utilization of social media.  This migration to social media platforms is reflected in Facebook’s sizable market share gains in display advertising impressions, with comScore reporting that in Q1 2011, Facebook served over 346 billion ad impressions or more than 31% of all U.S. display ads, a figure nearly double the company’s impressions served in Q1 2010 when it accounted for just over 16% of the U.S. display market impressions.  Looking at the top ten, Facebook served 20%+ more ads than the other nine leading sites combined!


As Carolyn Everson, who recently left her post as Microsoft’s head of global ad sales to run sales for Facebook, notes, “Everyone is really eager to partner with Facebook, and I see tremendous interest in Facebook, more interest than in any other company I’ve worked for ─ and that’s why I joined. The companies are asking for help in how to bring their brands to life.”


Figure 1: Facebook Display Advertising Share Increasing as Company Increases Share of Eyeballs

Source: comScore


We believe advertisers will continue to increase their spend on Facebook as the platform becomes increasingly ubiquitous, as brands become increasingly comfortable with social media, and as Facebook continues to improve the tools available to advertisers.


Facebook’s advertising is still in the embryonic stages and the company is innovating to enhance the experience for advertisers.  Last week we discussed their rollout of Facebook-Studio, a stand-alone community site that allows advertisers to share the work they’re producing on Facebook and gain inspiration from viewing successful examples from their peers.


This week, Facebook released enhancements to its advertising analytics tool with an increased focus on social metrics, incorporating new columns like “Social Reach”, defined as the absolute number of people who saw an ad with social context (names or pictures of friends who connected with the ad’s destination), and “Connections”, defined as social actions triggered by an ad, including Page Likes, application installs, and Event RSVPs.


Figure 2: Facebook’s New Advertising Analytics Tool Emphasizes Second Internet Metrics

Source: InsideFacebook


Facebook sits in the center of the Second Internet and we are encouraged that the company is evolving its advertising product to reflect the unique attributes that define this ecosystem.  We believe that this strategy not only clarifies the core value to advertisers, it also encourages the creation of advertising campaigns that can enhance, rather than diminish, the user experience.


Figure 3: Second Internet Attributes

Source: Wedbush Securities, Inc.


Their efforts appear to be paying off as users are increasingly interacting with brands on Facebook.  In a proprietary survey we conducted in April with 2,500 Internet users, 59% of Facebook users stated that they had “Liked” a company/brand, up from 51% when we polled in November 2010 and 47% when we polled initially in September 2010.  Interestingly, the increased interaction was spread across all age demographics, with users over 55 showing the greatest increase (up 19% since our first poll in September).


Figure 4: Our Survey Finds Facebook Users Are Increasingly “Liking” Brands

Source: Wedbush Securities, Inc.


In addition to Facebook getting better, advertisers must also improve at leveraging the platform to its fullest.  Search Engine Optimization (SEO) company BrightEdge found that less than one-third of the top 200 brands in the Fortune 500 had Facebook pages that appeared in the first 20 Google results for the brand’s name.


Figure 5: Brands Are Still Learning How To Optimize Facebook Pages

Source: eMarketer


In addition to SEO for Facebook pages, in our Second Internet report, Matt Monahan, Director of the social advertising technology company, EpicSocial, suggested that savvy advertisers should increasingly prioritize News Feed Optimization (NFO).


As Monahan explained, Facebook has an algorithm called EdgeRank that surfaces the most relevant content to the top of the newsfeed.  The exact details of the EdgeRank algorithm are known by few, but the two major drivers of relevance between brands and fans on Facebook are the number of fans a brand has relative to other brands in its category and the post quality score of the brand’s content published through their fan page. On Facebook, post quality score is a 7-day rolling average of likes, comments, and shares of content distributed through the fan page to fans.  It’s important that brands maintain leadership in their category in terms of fan number and post quality.  The newsfeed is a powerful communication tool capable of creating earned media value, cost avoidance and driving sales for brand marketers.


In other news, EpicSocial, along with Sharethrough, SocialVibe, and SuperSonicAds, have been announced as initial test partners for a new Facebook program that enables brands to reward users with Facebook Credits for watching sponsored videos.   Now, brands can buy and distribute Credits to their target audience in exchange for their time, attention, and feedback.   Users can spend Facebook Credits on virtual goods within Facebook games like Farmville and on Facebook Deals.


Says Monahan, “The Facebook Credits program improves the value proposition of the platform and will be a driving force behind brand dollars currently being spent on TV shifting to Facebook.   We expect increased attention to this offering as a result of the predictability, target-ability, and ultimately, the ease through which social audiences can be delivered to branded video content through the Facebook Credits program.”

Figure 15: New Facebook Program Allows Brands To Buy & Distribute Credits to Target Audience To Incentivize Interaction

Source: Company data










OBL Death & Royal Wedding Mark High Points for Social Media, Advertisers Take Notice


Last Monday at 10:25 PM EST, Keith Urbahn, a former aide to Donald Rumsfeld, tweeted:

Figure 1: The Tweet Read ‘Round The World

Source: Twitter

From 10:45 PM – 2:20 AM EST, 27.9 million tweets were generated, breaking the record for the highest sustained rate of tweeting at an average of 3,000 Tweets Per Second (TPS).  During President Obama’s address, the rate of tweeting peaked at 5,106 TPS.  Notably, the record rate is 6,939 TPS which took place at New Years 2011 in Japan (a country with advanced smartphone technology).

YouTube views of President Obama’s speech exceeded 5.5 million views (his White House Correspondents Dinner speech got 7.2 million in five days, the most ever for a Presidential speech).

Figure 2: News of OBL’s Death Yielded Highest Sustained Rate of Tweeting Ever

Source: Twitter

While Urbahn’s tweet spread viral news of Osama Bin Laden’s death, Sohaib Athar aka @ReallyVirtual had actually “broken” the story hours earlier, unknowingly live-tweeting the raid from his first person vantage point in Abbottabad, Pakistan:

Figure 3: @ReallyVirtual Tweets OBL Raid Play-By-Play


Source: Twitter, via Namesake

Since his tweets were discovered, @reallyvirtual’s Twitter account surged to over 100K followers, from less than 100, and prompted the IT consultant to release a humorous FAQ page where he could direct countless inquiries.

Figure 4: @ReallyVirtual Has Attracted Over 100K Followers Since Tweeting His First Hand Account of the Raid


Source: TweetDeck

The previous week witnessed another occurrence of social media’s growing impact on real world events.

Mainstream media took advantage of the content being produced through social media by integrating the user-generated content during the royal nuptials.  Most notably, ABC broadcast the royal wedding live direct from its Twitter feed, while attempting to create an interactive experience between social media and its broadcast.

Figure 5: While The Internet Loved The Royal Wedding, The Flower Girl Was Less Enthused


ABC and Twitter came up with hashtags such as #RoyalSuccess and #RoyalMess to describe people’s reactions to dresses and to describe the #RoyalKiss.  Messages posted on both Facebook and Twitter were read from the screen, and a TwitterTracker was used to gauge user engagement in different aspects of the coverage.  As an ABC News executive commented, “Social media isn’t a novelty anymore, and you can’t treat it as such.  It’s not something you can even just do.  You have to constantly iterate and push things forward, and that’s what we’re trying to do.”

Figure 6: ABC Integrated Social Media To Provide More Complete Coverage of The Royal Wedding

Source: Twitter

Large scale planned events like the Royal Wedding or the Super Bowl attract new users to social media platforms and encourage enhanced interactions as users congregate to engage with the event.

Additionally, advertisers are increasingly embracing social media to insert their brands into the conversations around these major events.  We were particularly impressed by Unilever’s Magnum Ice Cream usage of the #RoyalWedding hashtag.

When Twitter users clicked on the #royalwedding hashtag, they were directed to the day’s Promoted Trend, which was sponsored by “Magnum Ice Cream.”  Clicking on “Magnum Ice Cream” then directed Twitter users to Magnum’s Facebook page (which now has over 1 million fans).

Figure 7: Unilever’s Magnum Ice Cream Social Media Campaign Yielded Massive Earned Media Impressions

Source: Facebook

Figure 8: Unilever’s Promoted #RoyalWedding Significantly Outperformed @ClarenceHouse’s #RW2011

Source: Twitter

Figure 9: Unilever’s Campaign Has Resulted In Owned Audience Which the Company Can Reach & Impact

Source: Klout

DEAL COMMERCE (aka Daily Deals): The New AdSense

A recent survey by the American Institute for Certified Public Accountants indicated that over 23 million Americans (10% of the adult population) purchased a daily deal in 2010.   There is no doubt that the Deal Commerce space (aka Daily Deals) is huge, and poised for continue growth.  But how prevalent will Deal Commerce become?

We think Deal Commerce can become as ubiquitous as AdSense.

When Google introduced AdSense in 2003, the concept was simple:  take the search experience, and the unparalleled traffic monetization of, and present contextually relevant paid links all around the net.  Today, AdSense is part of the monetization toolset on millions of websites, in addition to over 50 million “parked” domain names around the world. (Aa “parked” domain is a website that exists simply to monetize the direct navigation traffic through Google AdSense.)  In 2010, Google earned roughly 30% of total revenue through Ad Sense.

AdSense in a Parked Domain:

AdSense spread rapidly because it is such a powerful tool for monetizing from Internet traffic. There has never been a true competitor to AdSense for monetizing traffic on many Internet sites.  Until now…

We believe that Deal Commerce, which is embryonic today, will evolve into an increasingly powerful and personalized commerce experience, with the potential to pose the first true alternative/complement to Google AdSense for monetizing large swaths of Internet traffic.

At the recent heavily attended Daily Deals Summit in New York, we were surprised by the substantial number of media companies including Rogers Media, The Boston Globe, CBS, Hearst, The Wall Street Journal, and others that were looking to develop partnerships to monetize their traffic with Deal Commerce.  We even met a domainer who is buying up Deal Commerce related domain names to monetize their traffic with affiliate deals.

The reason that so many people came to the Daily Deal Summit and the reason for the general frenzy going around Deal Commerce is because the economics work.  Local retailers can easily leverage the Internet to drive significant traffic to their store in a cost effective manner.

And it’s not just local merchants that are participating; big brands are also getting in the mix.  While the press gave a lot of attention to national deals run by The Gap (not happy with outcome) and Amazon (happy with the outcome), we are seeing more nuanced national deals like General Mills recent deal to offer deep discounts on “packages” of 12 General Mills products in Minneapolis.  In short order, 5,000 packages were sold out.  In addition to the one time lift, the General Mills deal also included a book of coupons that was delivered to the buyers’ homes.

While much has been written about the presumed lack of long-term value that customers sourced through the Deal Commerce ecosystem provide to companies, we believe that concern misses the larger picture.  We believe that a new commerce paradigm is emerging to which consumers are responding in massive numbers around the world.   The simple undeniable truth is that…….everyone wants a deal.

The ecosystem is evolving rapidly, and providing incremental value to users and merchants.  A great example is Village Vines (see Guest Post by CEO Dan Leahy later in this report).  The Village Vines value proposition to consumers is very simple, 30% off high end restaurants.  The twist for the restaurants is that they get to choose the days and times the discount can be used ─ so they don’t have to give the discount on a Saturday night when the restaurant would be filled with customers paying the full freight.  We highlight Village Vines as a simple example of how the Deal Commerce space will evolve.

Another example of the rapid evolution is the market share gains made in the U.S. by Living Social:

There are many factors driving the market share shifts noted above, including the Living Social offer by Amazon in which 1.4 million consumers participated, many for the first time ever in a Daily Deal.  However, we believe another factor is that Living Social is a Second Internet company at its core, having its roots in Facebook applications.

That’s why Living Social gets a significantly larger share of its traffic from Facebook than does Groupon:

Recognizing their users’ interest in Deal Commerce, both Google and Facebook are taking steps to retain some of the value they are sending elsewhere.  Months after having their $6 billion offer for Groupon rebuffed, last Thursday, Google unveiled Google Offers, rolling out the initial beta version in the Portland, Oregon market.  In March, Facebook announced its intention to test a daily deals service in San Francisco, San Diego, Atlanta, Dallas and Austin and on Monday, they unveiled their Social Deals product in these markets.

Not only will new entrants contribute to the burgeoning ecosystem, we believe that Deal Commerce is poised for major evolution as location is increasingly factored into the deals offered. The Groupon Now Mobile App is poised to rollout in Chicago.  The app will have two buttons “I’m Bored” and “I’m Hungry”.  When a consumer hits one of the buttons, they will see nearby deals, offered for brief periods of time, which will meet the need indicated.  LivingSocial’s Instant Deals is a similar platform being tested in Washington D.C. that enables merchants to create deals on the fly and get traffic in the doors for certain periods of time.

To sum up our view, we believe that Deal Commerce is not a passing fad, but rather, the category is emerging as a major new commerce experience driven by the ease with which local merchants can leverage the Internet for the first time.  It’s the early days and there will be rapid market share gains and losses as the ecosystem evolves to best serve the needs of merchants and consumers.  But given the ability to drive significant revenue, we believe Deal Commerce may become as ubiquitous as AdSense around the net.

Given how diverse and rapidly evolving the Deal Commerce ecosystem is, we are pleased to present the following guest posts by some of the companies that are driving the revolution.


Segmenting the Deal Commerce Market

Guest Post by Jim Moran, CEO Yipit

Though just two years old, the Daily Deal market is now worth billions and specialty layers are forming to slice that value.

Here’s how we view the Daily Deal market:

Daily Deal Sites

The largest players are pure play Daily Deal sites, such as Groupon, LivingSocial, BuyWithMe and others. These companies service both consumers and merchants and they control the majority of value created today.  According to our recent data and industry estimates, Groupon generates around $17K per deal, while LivingSocial generates $23K. Mean price point for both is approximately $45 per offer, however, Groupon runs significantly more offers per day, and thus has total daily revenue above its peers.


Vertical Deal Sites

Attempting to compete with the scale of the larger players, newer entrants often focus on a single vertical. Conceivably, they have an edge on user acquisition since everyone who signs up for a niche daily deal service is interested in that niche. Furthermore merchants working with such a specialty site would enjoy better access to enthusiastic, repeat customers for their vertical.

The largest vertical focused site that displays its purchase count is OpenTable, which averages 563 vouchers sold per deal at $25 per voucher, or $13K per deal.  Vertical sites’ pricing can vary widely across niches: LivingSocial Escapes, its travel offering, averages $288 per deal while Gilt City averages $110.  At the other end, Yellowbook’s Weforia, ValPak Deals and the Village VOICE each average $21.



Major publishers like the DailyCandy, McClatchy, NYTimes, SF Chronicle, San Diego Union Tribune, and Thrillist have entered the space. Their specialty is mobilizing their audience, whom they’ve been telling how to spend their local dollars for years.

Publisher success has varied depending on style of implementation: For instance, San Diego Union-Tribune’s product, which is displayed prominently on its homepage, averages $19K per offer from fewer than 1 million monthly unique visitors, while the Washington Post’s product, which is absent from its homepage and has a separate brand, averages less than $5K per deal despite WashPo having nearly 10X the traffic.


White-Label Providers

White-Label providers focus on the publishers with access to consumers. Certain white-label providers such as Analog Analytics and Nimble Commerce are mostly technology plays, while others such as Powered By Tippr and Group Commerce have a large sales forces.



There are now at least four Daily Deal exchanges facilitating the transfer of merchant offer contracts between sales forces and publishers.  Presumably the market is made on commissions offered to the publisher and details of the offer. While this is a new segment for Daily Deals, we note that in the display ad world, exchanges represent an increasing portion of total display ad dollars.


Merchant Services

There’s no shortage of people trying to own the consumer mindshare in the daily deal space, and similarly, services are forming to maximize the value to merchants in the burgeoning space. Companies like Closely have methods for merchants to convert promotion visitors into repeat customers.  There are also agency models, like Stampede, that help merchants optimize best practices, demographics and commission rates for their clients.


Consumer Services

The purchasing and redemption of offers has created new pain points for consumers that startups have formed to address. Secondary markets like Lifesta, DealsGoRound and CityPockets allow users to exchange unwanted vouchers with each other.



As the number of daily deal sites has continued to proliferate daily deal aggregators like Yipit have formed to recommend deals to users based on where they are and what they like.


Taking a Closer Look at the Stand-Alone Deal Commerce Sites

Guest Post by Eric Yohay, Business Development BuyWithMe

The daily deal industry has seen an explosive number of competitors emerge in the last 18 months (350+ companies).

While surveying the competitive landscape, we have found single city daily deal players gravitate towards two separate buckets:

  • Peaks ~10K unique users, 2K registered buyers, gross monthly sales from 10-20K at a frequency of 1-3 deals per week.
  • Peaks ~30K unique users, 5k registered buyers, gross monthly sales from 30-75K at a frequency of 3-6 deals per week.

Through conversations with over 50+ daily deal sites, we found that 90% fall into the first bucket.  For these companies, growth typically flatlines due to low (or no) paid marketing efforts, narrow focus on single city growth, and lack of sufficient capital to staff for sustainable future growth.

At the top of the spectrum, the largest national stand-alone players are Groupon and LivingSocial.  These players are the few who are able to run true local deals (compared to national e-commerce deals) with local merchants through their shopping portal (no aggregation of deals from other sites) and have been able to sustain a new deal every day in every major US market.  This type of frequency and scale is only obtainable through heavy investment in a direct sales force, tech resources, and user acquisition.

While a majority of the market typically can only feature 20-30% new deals (merchants first time running on a daily deal site), Groupon and Living Social are able to fill over 80% of their deal calendar with first time deals.

The major differences in growth strategies between the single city daily deal players and the top national players can be explained by their ability to dedicate financial resources to different channels.  Single city players must rely on organic word of mouth growth, merchant participation (emailing the deal to their list), social media, and event type marketing.  Living Social and Groupon, conversely, can rely on the snowball effect of tying up high quality merchants who have never run before, with massive distribution channels stemming from affiliate type relationships and large member lists.  These large member lists are fueled by rapid investment in digital marketing efforts, the network effect of having quality deals worth sharing (refer a friend programs), and PR/offline outreach.

With a deep understanding of the economics to the deal space, BuyWithMe is working to secure its place as the number three player. There are so are many other players.  Most will fail.


Utilizing a Unique Model of Deal Commerce To Improve Restaurant Yield Management

Guest Post by Dan Leahy, CEO Village Vines

With their ability to drive thousands of new customers to a local business in a single day, daily deal sites have quashed the notion that small businesses cannot use the Internet as a marketing tool.

Yet the very simplicity that has enabled these websites to scale at breathtaking rates has also limited their ability to serve a wide segment of the local business landscape.  A popular restaurant typically filled to 80% capacity is hard pressed to slash its prices through a daily deal when doing so means its loyal customers won’t be able to get a reservation (at full price) for months while the venue is inundated with coupon-wielding patrons.  As such, the restaurants that opt to offer daily deals are typically those in dire need of huge influxes of new customers, certainly an adverse vendor selection from a consumer’s perspective.

VillageVines is the web’s premier yield-management solution for restaurants, incentivizing consumers to dine during times when its restaurant partners have empty tables.  Members pay $10 to make reservations with over 500 restaurants in New York, Washington DC, Chicago, Los Angeles and San Francisco, and in turn their parties receive 30% off their entire bills (food and drink). Restaurants populate the inventory on with their tables that do not typically turn, driving substantial new business (many VillageVines restaurant partners report over $30,000 in incremental monthly sales from the service) while ensuring that they do not cannibalize their natural demand. And consumers can enjoy the finest restaurants their cities have to offer at unbeatable values.

Just as Priceline and Expedia revolutionized the way in which consumers book travel, VillageVines is changing the way consumers make their dining decisions by introducing pricing sophistication to the restaurant industry, and our marketplace is growing stronger every day. The daily deal space is not going anywhere, but as the market matures, solutions custom-built for targeted market segments will distance themselves from generic products trying to serve every type of business.


Iterating the Model to Improve Profitability

Guest Post by Chad Nell, CEO Stampede

Stampede aims to help businesses smartly use Deals and Social Marketing in new ways to maximize business growth.

As an example, Closely just launched “Social Select”, a program that turned the concept Daily Deals into a social tool for converting visitors into recurring customers, and for generating social referrals from the best customers. Offer Cards are printed with unique codes that take the user to a personal daily deal designed for return visits and for sharing with friends. Businesses have embraced the increased control of how and when they use these deals.

Another example is with the work Stampede is doing with OpenJar Concepts, Inc, an Integrated Marketing Firm.  OJC has a core competency of generating leads for clients in a variety of verticals ranging from Cost-Per-Lead to Cost-Per-Order offerings, using TV and Radio as the medium for awareness.   OJC brings a proprietary tracking and reporting system to their clients as well as enabling mobile offers and other key components to the marketing mix. OJC will be working with Stampede to bring national clients from products, services and brands to the Daily Deals market, with most deals supported by traditional marketing awareness.  In addition, OJC will assist Stampede in building out a Daily Deals network, similar to ad networks, that will include Tier 1 to Tier 3 sites, as well as sites with varying subscriber bases, and sites that are broad in focus or more narrowly niche-focused around topics or demographics.  The shared focus is to simply enhance the client experience.   By finding the tools that offer incremental value to merchants, the market will continue to expand as merchants that previously wouldn’t have considered Daily Deals, now find real value.

President Obama Visits Facebook, Gets Mark Zuckerberg To Wear Jacket & Tie for Second Time

Recalling memories of then-Governor Bill Clinton campaigning on MTV in 1992, on Wednesday President Obama engaged the Facebook Generation by leveraging Facebook Live capabilities to broadcast his town hall meeting at Facebook headquarters to the Facebook audience.   While the President didn’t break the record Facebook Live audience of 1.2 million who watched Katy Perry visit Facebook, the audience exceeded 100,000 people around the world.

Explaining his visit to Facebook, President Obama stated his belief in the importance of Facebook as a platform that is revolutionizing how we receive and process information.  By keeping citizens informed and engaged in the two-way conversation, Facebook is fostering a healthier democracy, stated President Obama.

This was the second time this year that President Obama has met with Mark Zuckerberg, with the previous meeting coming at a dinner with Silicon Valley’s top CEOs in February.

As we have previously mentioned, one of the risks to Facebook remains government regulations.  Facebook’s efforts to engage Washington are helping the company to navigate the regulatory landscape.  In 2010, Facebook spent $351,390 on lobbying (Google spent $5.2 million while Yahoo greased the wheels in Washington to the tune of $2.2 million).

Finally, it’s interesting to note the political debate that ensues when a President visits Facebook.  A post by the highly respected blogger/Professor (Harvard, Berkeley and Duke) Vivek Wadhwa noted that while it’s apparent that Facebook is playing a role in the drive to democracy in many countries and that the President is visiting Facebook for good reasons, Professor Wadhwa is worried that “…this attention could end up killing the golden goose? Think about it: if you are an evil dictator, looking for an excuse to block Facebook and Twitter, what better propaganda weapon than a picture of President Obama getting chummy with Mark Zuckerberg? Yes, I know that the U.S. government didn’t invent Facebook or even figure out how to use it until recently; and that it doesn’t control Facebook’s policies. But don’t those pictures and video clips tell a different story?”