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#DMS2011: SMBs and Deals: The Next Wave

This afternoon the BIA/Kelsey team gave an update on the daily deals forecast, which Peter Krasilovsky, VP and program director, projected will reach up to $6 billion in annual deal revenues by 2015.

Despite some media scrutiny of the daily deal space, BIA/Kelsey remains confident that the biggest successes are yet to come, stating in today’s presentation “the deal a day industry is poised for strong growth.” Mark Fratrik, VP and chief economist, attributes this to 1) an increasing focus on providing consumers with more personalized and geo-targeted opportunities, 2) businesses’ likelihood to move resources from other advertising vehicles toward this as a marketing option; and 3) the expansion and subdivision of sites, which will also help to combat consumer fatigue some providers are experiencing.

Yipit estimates there are around 600 companies in this space today. With the barriers to entry so low, we’re probably going to see this figure continue to rise for a number of reasons:

  • The huge mailing lists daily deals providers maintain. Did you know Groupon’s email count in Chicago is bigger than the combined circulation of Chicago Tribune and Chicago Sun-Times?
  • The “no money down” model makes entry simple and low-risk to local businesses
  • The deals model reinforces SMB advertising value
  • A new ability to target local customers on vertical and national basis
  • The space continues to become more credible to consumers. Where consumers wouldn’t have accepted or acted upon an expensive travel deal a year ago, they may do so today.

As we’ve regularly blogged this year, traditional Yellow Pages companies are already embracing this model to reinforce existing advertising relationships. Sales representatives can use group buying as a point of entry to a local business advertiser, and advise on a strategy behind it that will continue to deliver results long after the deal has passed.

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