A good indicator of future behavior can be found by viewing past history. In the grand scheme of capitalism, the daily deal industry is in its infancy; however, behavior over the past few years can give us insight into what will be happening over the next couple years.
‘Industry lifecycle’ is a concept relating to the different stages an industry will go through; from the first product entry to its eventual decline. There are typically five stages in the industry lifecycle and they are loosely defined as:
i. Early Stages Phase – alternative product design and positioning, establishing the range and boundaries of the industry itself.
ii. Innovation Phase – Product innovation declines, process innovation begins and a “dominant design” will arrive.
iii. Cost or Shakeout Phase – Companies settle on the “dominant design”; economies of scale are achieved, forcing smaller players to be acquired or exit altogether. Barriers to entry become very high, as large-scale consolidation begins to occur.
iv. Maturity – Growth is no longer the main focus, market share and cash flow become the primary goals of the companies left in the space.
v. Decline – Revenues declining; the industry as a whole may be supplanted by new innovation or industry. An example of this is hand held video cameras being supplanted by smart phone cameras.
This flow was defined based off of the typical industry lifecycle of manufactured goods. However, similar lifecycles exist for web-based businesses as well.
I believe the daily deal industry is somewhere between the innovation phase and the shakeout phase. My predictions (and they are just that; predictions) for 2012 and beyond in the daily deal industry…
Mobile growth and compatibility
When we want a deal, we want it right “now.” Daily deal sites need to continue focusing on mobile development and making it very easy for customers to make a purchase and redeem coupons and vouchers.
A large part of the daily deal future will be riding on the companies that are innovating in the mobile space.
The companies who are not putting any focus into mobile growth and compatibility will see their competitors who are begin to take a lead and gain more market share.
Smaller, niche-specific sites will continue upward growth and expansion.
As I briefly discussed in my last post about 7 Habits of Highly Successful Daily Deal Sites, being a “first mover” in nearly any industry definitely has upsides. It has its own set of downsides too, but in the daily deal industry the first mover companies who got a jump on their competition have had huge advantages and have been growing and gaining traction very quickly. There are many niche specific daily deal sites that have been popping up in random industries and odd, niche specific markets.
Niche specific sites and smaller geographic based players will continue to see growth. People enjoy hobnobbing with like-minded individuals.
Creating a “win-win-win-win” situation is crucial (merchants, employees, your business, & end customers).
It will be more important than ever to work out arrangements that cause a win for the merchant, a win for the employees offering the deal, a win for the customer, and a win for the daily deal site. We have seen merchants burned time and time again because of improper planning. We have also witnessed what happens when the customers are upset about a poor daily deal.
It will also be important for daily deal sites to not only focus on making the merchant and customer happy; but also work with the merchants and businesses to ensure employees don’t get the wrong end of the deal.
Continued consolidation, investments, and buyouts
2011 saw no shortage of investments, consolidation, and buyouts. Funding and VC in the daily deal industry will continue growth.
Continued failure of deal sites
Daily Deal sites who are not keeping up, will continue failing. 2011 saw a few major players close their doors. This will continue happening as deal software providers such as us, DailyDealBuilder, dramatically lower the barrier to entry to start and launch a daily deal site.
Lawsuits and patent trolls will continue filing suits and causing trouble.
It seems Groupon and Google get sued on a near daily basis from patent trolls and I do not see this slowing down any time in the near future.
I’m excited for what the daily deal industry holds for us in 2012. What do you think will be happening this year in the industry?
Marc Horne
Daily Deal Builder
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