Sizing the Deals Space: A Trillion Here, a Trillion There

You know the saying: “Pretty soon, we’re talking about real money.”

So how big is the deals space? Groupon COO Margo Georgiadis suggests it’s after the $150B local ad market. Mark Fratrik, BIA/Kelsey’s own economist, forecast the U.S. deal space to grow to somewhere between $3B and $6B by 2015. But Mark’s forecast is based strictly on the existing deal-a-day business. At our Deals 3D event July 18 and 19 in San Francisco, Yipit cofounder Jim Moran will make an argument that the deals market will eventually trigger all kinds of advertising and commerce, so it should be seen as more of a trillion-dollar marketplace.

So what’s $850B among friends? Here’s my simple math. The U.S. economy is about $15T. SMBs account for something in the order of $5T. So if the deals space does serve as a new foundation for commerce, as Moran and others suggest, we are, in fact, talking trillions not billions.

We can look to the retail industry as one example where “deals” have become the core driver of most of the industry sales. I don’t know about you, but I wait for the half-yearly sale at Nordstrom before I think about dropping a pile of money on clothes. Much to its chagrin, the retail industry has “trained” us to wait for the big sales — and we generally do.

If you take this model to the SMB space, the impact of Groupon, LivingSocial and dozens of other SMB “deal” companies will be felt for years to come. On the consumer side, we’ll increasingly wait for “deals” before we act.

The integration of deals into the local search space has its own implications. Consumers like you and me will be able to “search” for deals on sites like Bing, Google and even YP.com that make sense for us, rather than hoping that the next email in my inbox is the “deal” I need now. Or they’ll have deals pushed to their smartphones.

From the merchant angle, the broadening of “deals” will enable millions of SMBs to leverage the local search platforms — social, mobile, directional — to announce their deals to existing and potential customers. At the same time, however, many merchants will be approaching the deals marketplace with increasing caution if they become convinced that deals appeal more to coupon clippers than to new customers. This is a real concern.

But in the end, we believe the new deals environment leads could lead to a real shift in the nature of local commerce. In 10 years, today’s local media business could even be a historical footnote, paling in comparison to a richer, more targeted “deals” space. It is even possible that millions of SMBs will simply shift a good chunk of their budgets from media solutions to engagement and offer solutions. In 10 years, you and I may even look back at the Deals 3D conference in 2011 and wonder why we didn’t substitute Mr. Robinson’s famous quote about the future opportunity in “plastics” with “deals.” Hope to see you in SF July 18 and 19. You may register here.

This Post Has 2 Comments

  1. Michael

    Deals have become an integral part in many Local SMB’s marketing plan. We recently published a blog offering Tips to Small Business Owners who offer Daily Deals Online. we hope this helps business owners get the most out of offering Daily Deals

  2. David Strebinger

    I could not agree more with the idea that this is a “Trillion Dollar Market”. Deals already exist as part of our daily lives. There are already “Trillions” of dollars in deals floating around every marketplace in the world every day. All that is happening is we are finally in a position where we are digitizing all of those deals and putting them into an electronic and searchable format.

    When you walk down the street and look into the retail shops in any direction, how many of those retail shops are running “Sales”. That is a Deal. Take that “Sale” turn it into a “Deal” and put it into an online searchable format that has geotargeting associated to it for more precise localization and you now have “Deal inventory” that consumers can find through keywords and transact on in an online and mobile environment.

    When you go to a restaurant for dinner… how many restaurants have a “Happy Hour” or “Daily Specials” that are featured at a discount. That is a “Deal”. Take that content, turn it into a searchable and location specific “Deal” in an online environment that consumers can transact on and you have “Deal Content”.

    When you are watching TV and there is a Bank, an Insurance Company, a Mortgage Broker, a Realtor on TV and they are presenting you with an “Offer you cant refuse” to get a discount or incentive if you pick up the phone and call right now… That is a “Deal”. Take that content, turn it into a transactionable deal that can be transacted upon by mobile and online consumers and you have “Deal Content”.

    The industry exists today… we have simply never created a consistent and searchable format for consumers to quickly and easily find and transact on deals (until now). The next few years will simply be focused on taking all of the worlds “Deal Content” that already exists and associating it to location specific merchant profiles that can be found through Search, online, on mobile, in print, and through email.

    We have not even touched the surface of this industry. The industry will simply become the evolution of online and mobile advertising and we are simply moving away from clicks and toward transactions that truly deliver results that merchants and businesses are out to achieve.

    This is not a Billion Dollar industry… this is the beginning of the future of every businesses core way to connect and transact with their customers. This is a Trillion Dollar industry over the next 10 years.

    David Strebinger – Wantsa.com

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