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.