Daily Deal? Maybe Daily Don't!
December 01, 2011 at 2:54 PM
People have some funny business ideas when it comes to websites. In 2009 everyone came to us wanting to build the next Trade Me, usually for under two grand. We nicely explained that to build an auction website of any substance, it'll take at least $200,000 in development. Oh, and you'll also have to simultaneously convince those Trade Me enthusiasts to ditch what they know and love, and to use your website instead. An auction website is only as good as the size of the community that's using it, right? "Any ideas on how you'll manage that?" we'd enquire. The answer was usually a quick "thanks for your time" followed by a hang up dial tone.
APN tried Sella.co.nz, and they're a multinational media company with unlimited resources, both financial, and technical. They had a pretty hard time taking on Trade Me. I don't know how many millions of dollars APN has poured into their challenge, but I'd guess a fair few. And they're still struggling to take users away from the New Zealand equivalent of EBay.
In 2010 it was Facebook. I mean, if Mark Zuckerberg, one of the best programming minds to ever tap on a keyboard can do it, what's stopping Dave from Taranaki? I mean, he has a couple of grand, and an idea, right? Wrong. Once again, even if you were to invest the literally millions of dollars it would take to build a social networking site, it's only as good as the community that uses it. How are you going to get those Facebook addicts to become a Dave's Book addict instead? Pretty tough I'd reckon.
And that brings us to 2011. The year of the daily deal website. And already we've got the bandwagon of internet millionaire hopefuls following suit. They want to take on Grab One, Treat Me, 1-Day Deals, and the plethora of second tier competitors flooding the market. In their mind, it's basically an Ecommerce website with 3 products you can change yourself. I mean, how hard can it be? Let me break it down for you.
Firstly, a daily deal site is an incredibly complex beast from a programming perspective. As far as I know, Grab One now has around 10 full time developers working on the site, adding new features and functionality to make it the preferred choice for internet bargain hunters. Iphone applications, coupons, daily email marketing, social media strategy, referral system integration, accounts and payment systems for both advertisers and consumers etc. etc. etc. This stuff costs a lot of time and money.
Secondly, the site is only as good as the deals you can get on there. How are you going to consistently source a high calibre of advertiser, day after day, with products people want, and with deals that will get people buying. Why are they advertising on your website instead of on a website with truck loads more members like Grab One or Treat Me? Have you budgeted for your nationwide sales force to build relationships with advertisers, manage their accounts, and get them coming back?
Thirdly, how many daily deal websites do we really need? There are currently around 100 in New Zealand – have you heard of more than 5 of them? Clearly, this is a market that will be dominated by 3-4 main players. The rest will ultimately fall into the abyss of failed internet ventures. Now let's be honest – Treat Me is owned by Fairfax Media, who own Trade Me, New Zealand's most successful website ever. Grab One is a Joint Venture with the guy who started Finda, and APN, the mulit national who owns the New Zealand Herald. 1-Day Deals is another arm of 1-Day, one of New Zealand's most popular Ecommerce websites. And Yazoom is owned by Brand Developers, the As Seen on TV guys – pretty deep pockets I'm guessing.
If you're crazy enough to try and break into this already highly competitive space, you need to be a realist. You need at least $1 million to pay for a development team who may have some chance of catching up with all the developments and features already in the best performing daily deal websites. Then you need at least another $1 million dollars for a sales team, accounts team etc. And then you need at least a $1 million dollar marketing budget to quickly convince people to come to your website and buy your deals, so your advertisers want to come back and book again next quarter.
In my opinion, even then, I reckon you're still screwed. The daily deal ship has sailed. The sites are up, and working well. The community has decided which ones they want to subscribe to. The advertisers have decided which deal sites they'll form a relationship with. There's just no room of a Johnny come lately, even if they had a few million to spend.
If you're considering doing a daily deal site, stop. You missed the boat. Look forward – what will the big internet concept be in 2013? Pick that, and maybe you're on to a winner. Now are you ready to invest the money to make it happen?