There is no arguing that the Internet has made the world smaller. Because of the Internet we can now share information instantly—and virally—from Seattle to Cairo to Bangladesh. One somewhat counterintuitive byproduct of this global information age, at least for me, is the increasing number of hyperlocal services popping up as a result. Internet culture has taken a turn in recent years toward helping the consumer reconnect to the community immediately around them, from neighborhood news sites, to location-based social networking, to the latest locally focused trend—group buying sites.
If you haven’t played around on one of these sites yet, here’s a quick rundown on how they work. One of the most popular deal-a-day sites in terms of traffic is Chicago, IL-based Groupon. This early leader in the deal-a-day scene generated 4.6 million unique visitors a month, as of May, according to web analytics company Compete.com. Founded in November 2008, Groupon has quickly grown into a mega-business by offering a limited number of daily deals to local restaurants, shops, events, entertainment, and services at heavily discounted rates in more than 90 cities in the U.S., Canada, and Europe.
Following in the footsteps of sites like Groupon and its two biggest competitors, Washington D.C.-based LivingSocial, and Boston-based BuyWithMe, smaller deal-a-day companies have popped up all over, competing for who will offer the best daily bargains in any given city. And not surprisingly, the industry has gained a lot of traction as the competition grows fierce. To give you an idea of how fast the market is growing, Living Social rolled out 25 new local sites on Tuesday alone, bringing its total up to 52 markets across three countries. BuyWithMe raised $16 million in Series B venture financing last week. And Seattle-based online superstore Amazon decided to jump into the game, acquiring Carrollton, TX-based deal-a-day site Woot last month.
Here in the Northwest a number of local sites have made an attempt to carve out a piece of the local market for themselves, including Redmond, WA-based Yubit, and the 4-month-old, Tippr. Even Seattle-based business and people search WhitePagesDealPop, which went live yesterday. And I have to say, it’s been hard to figure out who’s who in this new group buying realm, and which daily deal site, if any, is the best on the market—for both consumers and businesses. has jumped in with its own local deal site,
To shine some light on this new trend, and how it’s shaping the local marketplace, I turned to founder of Seattle-based Nology Media Leigh Fatzinger, who also shared his insight into the recent rise in location-based social media platforms, specifically for the mobile industry, earlier this week. Although Leigh acknowledges the obvious appeal of daily deal sites, he says the new group buying fad hasn’t quite found its groove yet. The problem for merchants who work with daily deals sites like Groupon, he says, is that the coupons are sent out to mass e-mail lists, rather than being targeted directly to individual consumers. Plus, there is “the expectation that it’s going to be cheaper every time you go.” If you score a great deal on a group buying site—say a $400 dinner for only $200—will you really go back to that restaurant again and shell out the full price that the merchant needs to make a profit?
“Brands have got to be cautious when using tools specifically like daily coupons like Groupon, because what brands really want is people to be using their brands all the time. They want people to become regulars,” Fatzinger says. “Coupon sites are very good for the consumer, but I just don’t know if they build brand loyalty.”
Tippr founder and chairman Martin Tobias disagrees. The Seattle entrepreneur and investor started up the social discount voucher site back in February out of his online community site Kashless. Within three months, Tobias says Tippr—which has expanded beyond Seattle to branded sites in 10 cities nationwide as well as another 10 offering different Tippr-powered deals through publishing partner brands—had already surpassed BuyWithMe in terms of traffic in the local market, putting it at No. 3 behind Groupon and Living Social.
“We’re the fastest-growing competitor of the big three of all the other competitors,” Tobias says. “That number quadrupled and we
