The group buying consolidation is finally happening.
After months of talk about the inevitable decline in group buying, Australia’s largest deals companies are showing their cracks. Spreets has announced it will start selling deals from other sites under a new affiliate model.
It has also been reported Yahoo!7, which owns Spreets, has abandoned talks about a possible merger with Cudo, owned by Nine Entertainment.
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Spreets will now sell deals from the two group buying companies owned by international parents, Groupon and Living Social.
It’s a steep decline from the height of the company’s success. Founded by Dean McEvoy and Justin Hammer in 2010, the business was sold to Yahoo! for $40 million. The pair sold out in 2011 before the industry started declining.
“This is the consolidation that everyone has been talking about,” Telsyte senior research manager Sam Yip told SmartCompany.
“It’s becoming an increasingly competitive market.”
The announcement comes just days after several group buying veterans told SmartCompany the market was in decline. In particular, former Cudo chief Billy Tucker said he left the industry at a “good time”, while the local director of LivingSocial said group buying companies owned by media entities offered a confused message.
Critics suggest combing media and group buying interests doesn’t mix.
Sources within the group buying industry suggest Spreets has been on a financial downslide for several months. But Sam Yip says it’s impossible to say whether Spreets’ transformation to an affiliate model comes due to the fact it’s owned by a media company.
“You can’t say one way or the other; you have to look at everything on a case-by-case basis. Both Cudo and OurDeal are doing well,” he says.
“These sites leveraged media assets to get merchants on board.”
In a statement, Spreets said it has built a “large and vibrant” community who look for great deals.
“Spreets will source deals from our advertising partners and from new affiliate partnerships with group buying players.”
“This evolution allows Spreets to become a more sustainable and profitable business that better aligns with the Yahoo!7 business strategy.”
With Spreets no longer bringing on merchants of its own, it will be closely tied to the performance of both Groupon and LivingSocial. While both claim to be in good health, LivingSocial recently made 24 staff in Australia redundant as part of a global restructure.
Groupon’s financials have also suffered in the past year. Overall, Yip says while the “bubble has burst”, there’s a significant amount of opportunity still there.
“If you look at the numbers, the market is at sustainable levels.”