Online deals firms don’t always make it
When Daniel Island construction veteran Steven Dolloff entered the Internet deals market last year, he purposefully tweaked the Groupon model.
Instead of sharing the discounted profits with merchants, Dolloff’s InTown.com charged them just a dollar per month to post on the retro-look site and another dollar from consumers for each deal they bought.
Speaking shortly after the spring launch, a Groupon spokeswoman openly wondered how InTown would make any money — a concern that would prove prescient.
“We realized very quickly, mid-June, that it wasn’t really as effective as we hoped,” Laura Dolloff, Steven’s wife, said of InTown’s concept.
So the Dolloffs went back to the drawing board. Instead of a dollar a month for merchants, they decided to charge $299 per year for them to post deals or more standard advertisements. They also redesigned the website with “brighter, bigger pictures, you know, going off what’s popular,” said Laura Dolloff, a former teacher and jeweler who now handles sales and marketing for InTown.
With the enthusiasm of a pitchwoman, Dolloff claimed this week the new strategy is working, at least allowing InTown to break even.
“Do I think that we’re going to make some additions and changes? Of course,” she said. “It’s always going to be two steps forward, one step back.”
The InTown story is illustrative of the continuing ebb and flow in the deals business over the past year.
When The Post and Courier surveyed the scene in spring 2012, there had just been a rush of local entrants into an already crowded market. In addition to national leaders Groupon and LivingSocial, at least 10 other outfits were offering deals in the Charleston area.
They emphasized mobile or local or aggregation. Even though “deal fatigue” already had set in for many businesses and consumers, there also seemed to be a lot of optimism among the aspiring web brokers.
Since then, much has changed. Most have struggled, and that has led to strategy changes, consolidations and some outright casualties.
“It’s the exit or the pivot, and pivoting is better than exiting because at least then you’re still in business,” Forrester Research analyst Sucharita Mulpuru-Kodali said of the churn. “It’s a resounding testament to the idea that the daily deals business was a bad idea.”
Groupon has gone through as much as anybody. After watching its stock price plummet from $20 during its November 2011 initial public offering to less than $3 a year later, the Chicago-based company fired its founder and CEO Andrew Mason in February.
Its stock price has recovered some in the months since, to more than $9 in recent weeks, as the company has offered its merchants different ways to post deals, expanded into point-of-sale software and launched a premium channel for high-end restaurants this month. The company had more than 200 million subscribers as of last fall, 40 million of whom have bought a deal in the past year.
“We’re becoming more of an online marketplace,” said Nick Halliwell, Groupon’s spokesman, as opposed to its origins as an emailed daily deal.
LivingSocial has struggled even more. The Washington, D.C.-based No. 2 player laid off 400 employees, 10 percent of its workforce in November; suffered a massive customer data breach in April; and is now facing speculation that it might not be around another year. The company did not respond to a request for comment.
Meanwhile, a few of the local players from a year ago seem to have shut down entirely.
Deals past and present
sQuimble, a text- and Twitter-based platform that offered location-specific deals, seems to have gone dark. The website’s down, the last tweet was in June 2012, and founder Marlon Brown of Summerville did not respond to a call last week.
Deals past and present
The website for HurryHurry, a deal aggregator (among other things) relaunched last year by serial entrepreneur Rich Barton, now redirects to TechFaster.com, another of Barton’s projects. There’s no mention of HurryHurry on his LinkedIn page, and Barton didn’t respond to a phone message.
Same story with DealRhino and Charleston Daily Dealer — their websites are no longer functional.
Among the brighter stories appears to be Atlanta-based Half Off Depot, which took a $7 million investment from Atlanta venture capital firm Noro-Mosely Partners about two years ago and this year merged with CrowdSavings.com to become nCrowd. nCrowd acquired struggling national player Tippr in April.
Chief Operating Officer Lance Weatherby said Half Off Depot learned from Groupon’s IPO.
“When they did that, we realized we needed to stop growing, or trying to grow so fast,” he said.
So the company took the acquisition path, apparently successfully.
“We’re actually making a little bit of money,” Weatherby said, declining to specify, “and we’ve purchased these companies either through cash or cash and stock type transactions. We’re really the only company right now that’s really active in making acquisitions in this space.”
“You don’t hear about us very often, but we’re the No. 3 company in terms of size,” he added, saying nCrowd now has 50 employees and 3.2 million subscribers.
Among Half Off Depot’s acquisitions in June 2012 was Dealmobs, and one of its legacy customers from that deal, Mike Poirier of Mount Pleasant Music, has an idea about why the Atlanta company has been successful.
Whereas Groupon sent a check to him when people bought his guitar lesson deal, Half Off Depot only paid him when the vouchers were redeemed. So when people didn’t redeem their deals, as is often the case, Poirier got paid by Groupon but not by Half Off Depot.
“What a business model, man,” he said.
Weatherby said that is the way Half Off Depot works but that he’ll certainly take down the Mount Pleasant Music deal if requested.
“If anybody asks for me to do it again, I’d definitely ask how I get paid,” Poirier said.
More locally, GoCharlestonDeals, which just agreed to advertise with InTown, seems to be another company that has found a sustainable model and is sticking with it.
“We have been steadily growing and really focused, as we had been before, on our local niche,” Holly Roberson said. She declined to give subscriber or financial numbers but said two years into the business, she feels like, “We have everything in place for the market to take off.”
“We’ve worked hard to dig in and build a foundation to be here for the long haul,” she said.
What the next year, or decade, holds is of course unclear, but most, even Mulpuru-Kodali, the skeptical New York analyst, remain convinced that there is a long-term viable business in deals.
“There will be one or two big players in the space at the end of the day,” Mulpuru-Kodali said, including Groupon, and then perhaps local players like newspaper or “shoestring solutions.” “I think there’s a place for a few players, not as many as we had.”
Reach Brendan Kearney at 937-5906 and follow him on Twitter at @kearney_brendan.