Australia’s group buying market is in the midst of a consolidation period, according to analysts, after Melbourne-based site Deals.com.au announced it will merge with Sydney-based site Ouffer.
Deals.com.au was founded in 2010 by former M&A lawyer Adam Schwab and his business partner Jeremy Same. It will now merge with Ouffer Australia, also founded in 2010.
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Led by chief executive Joshua David, Ouffer is a members-only site featuring “daily lifestyle inspirations” in five Australian capital cities. The name is a combination of “our” and “offer”.
Deals.com.au estimates it will have a total of 1.4 million members throughout Australia, and a combined revenue of $38 million this year, as a result of the merger.
Schwab told SmartCompany he will control the newly merged entity, while David will control his business in a newly created division.
“[Ouffer] do a lot of things fantastically well. The guys who run it have some good assets on the table and, most crucially, they have a couple of new verticals they’re about to launch,” he said.
“One is on the gourmet food side, which we really think is going to take off.”
“There are some fantastic synergies here… It just gives us a bit more scale in the industry and hopefully it will lead to more solid profitability.”
The news comes less than two weeks after LivingSocial closed down sister site Jump On It, just three months after Jump On It was acquired by the US group buying giant.
According to technology analyst firm Telsyte, the group buying sector was worth $500 million last year. This year, the sector’s combined revenue is expected to grow by $100 million.
Telsyte senior research manager Sam Yip says the Deals and Ouffer merger – in addition to the announcement made by LivingSocial – confirms a consolidation period is now underway.
“It is something we were expecting… A larger player can generate upwards of $13 million in a single month with marketing support, so there is a need for consolidation,” he told StartupSmart.
According to Yip, the Deals-Ouffer merger is a great partnership.
“Deals is performing very well in Melbourne and also Deals is performing very well when it comes to high-price travel offers,” he says.
“With Ouffer, it’s great to see them make a large, strategic move. They’re strong in Sydney. You have a strong player in Melbourne and a strong player in Sydney, which is a great partnership.”
Yip says Ouffer has also been targeting a more “high-price consumer” in terms of its deals, “which is how Deals is targeting the market as well”.
According to Yip, the Deals and Ouffer merger represents a partnership in the medium to large site range. He points out that in the smaller range, there are upwards of 80 group buying sites.
“The challenge there is about getting the right audience onto their sites but not necessarily through partnerships with other group buying sites,” he says.
“It’s more about partnering with publishers – people who can bring the right audience to whatever niche they’re trying to do.”
With regard to new entrants, Yip says the key is to look at where the next level of growth is coming from.
“Specialised group buying niches that are out there are trying to get to those [growth areas] before the large sites do,” he says.
“In the small end of town, there is only space for niche, targeted offers, and also really selective geographies.”