Group buying revenue starts to fall

Revenue growth in the group buying industry has started to decline from its peak but the market is still ripe for larger entrants with existing audiences, such as media companies, new figures have revealed.

The new figures come as radio group DMG has announced the launch of its own group buying website in order to promote deals to its younger audience.

The figures from Quantium research, an analytics firm which analyses data for a number of major companies including NAB, show revenue peaked in August 2011, with the February 2012 results 34% below that point.

The industry is now experiencing revenue growth similar to that seen in April 2011.

But Telsyte senior research manager Sam Yip says despite the drop-off in revenue the market is still large, turning over $498 million in 2011 alone, and that it’s inevitable growth will decline as the industry settles into a more sustainable pattern.

“This market has gone from zero to half a billion dollars, and of course it needs to get out from unsustainable growth. It’s no wonder 95% of the market revenue is being generated by 10 major players.”

“We’re seeing a lot of market exits in the lower end, but we’re also seeing a lot of market entrants when it comes to existing media companies, media assets, and companies that have an existing audience they can market to.”

DMG announced its entry into the group buying market yesterday, with the site opening in Brisbane first. The company said it entered the market after a “lengthy review” of the industry.

“Our goal is to be the leading group buying site in Australia for 18-39 year olds, offering quality targeted deals to our highly engaged audience,” group digital director Rebekah Horne said in a statement.

Media companies have been quick to enter the industry. Ninemsn launched Cudo back in 2010, while Spreets was quickly acquired by Yahoo!7 in the same year. Yip says larger businesses such as these will continue to be the industry’s major players.

“What we’ll see is the major players that already have established businesses, and just want a little bit of cream on top.”

As a result, he says there isn’t a great chance the industry will die off any time soon.

“We expect the market to turnover $700 million this year. So it’s going to a more sustainable level, but it’s still growing at 30%.”