August 30, 2011

Groupon Traffic Declines Nearly 50%

Has Groupon’s ship sailed? Well, with its IPO pending, the group-buying leader has seen traffic decline nearly 50% since its peak in the second week of June.

That’s according to new Hitwise data based on Web-based traffic, but excluding mobile and app-specific traffic.

“Regardless … the drop-off in Groupon traffic this summer has been significant,” according to Bill Tancer, GM of global research at Hitwise.

During the same time period, rival Living Social saw a 27% increase in visits to its site.

Overall, visits to Hitwise’s custom category of Daily Deal & Aggregator sites were down 25% for the same time period. What explains the decline — and Groupon’s in particular?

“Perhaps it is simply a case of increased number of competitors and deal fatigue among consumers or simply not enough of the right deals,” Tancer suggests.

Groupon did not return a request for comment by press time on Monday.

According to a Local Deals Survey released by PriceGrabber in June, 44% of respondents said they use or search daily deal Web sites. Yet 52% expressed feeling overwhelmed by the number of bargain-boasting emails they receive on a daily basis.

Another key factor in the daily-deal market for these sites “is to focus on … attracting new and preferred audience segments via the inbox,” Tancer adds. “Currently, the audience segments for both Groupon and Living Social are very similar, so it will be interesting to see how both sites … perform heading into the holiday season.”

Looking into the future, Forrester recently predicted that the daily-deal market will be virtually nonexistent by 2016.

“Standing out above the clutter [will become] harder for marketers as ad exposures grow,” Forrester analyst Shar VanBoskirk explained in a report released last week.”Consumers will grow so conditioned to micro-impulse offers they’ll lose practice at considered decisions … Facing a cultural descent into maladroit judgment, employers (and spouses) will blacklist impulse deals to keep people intentional,” he noted.

Still losing money, Groupon said in June that it planned to raise $750 million in an IPO.

While sales at the Chicago-based company surged more than 14-fold to $644 million last year, Groupon has also reportedly amassed about $540 million in operating losses since its founding in 2008. In short, its costs are rising faster than revenue.

Do you think Forrester’s recent prediction –  that the daily-deal market will be virtually nonexistent by 2016 – is correct?  Give us your thoughts…

-by Gavin O’Malley,

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