Daily deals sites have been all the rage since the inception of Groupon. With the latest hype over LivingSocial’s buy-in into Asia, one would think that the only way to succeed in e-commerce would be to join the dark side. But is this really the case?
Jonathan Marchbank, newly appointed CEO of white-label platform Dealised has a different take on the evolution of e-commerce as we see it. He believes that taking the US-centric Groupon/LivingSocial model and slapping it onto Asia is not the way to go, and that the current method employed by these daily deals giants are just too un-targeted.
His company works with traditional publishers, media companies and telcos that have real assets, as compared with Groupon and LivingSocial, that are able to create loyalty and provide them with the technology needed to enter the daily deals space. In regions such as Australia, Scandinavia and Europe, traditional media companies with the help of Dealised’s support have been able to claim the top spot over the invading daily deals giants through the effective collaboration of these strong physical assets and Dealised’s technology support.
Dealised is moving into the Asian market with strong support from some regional investors. Their recent S$6.5 million Series A funding round was led by SingTel Innov8 which also involved Australian-based venture capital firm Yuuwa Capital LP. e27 managed to catch up with Jonathan to find out more about the company, their future plans and his personal view of the e-commerce evolution.
Give us some background on Dealised.
The company started two years ago by Pollenizer, which was an incubator in Australia. When Groupon started in the US there was this group of people in Australia who saw the business model and thought that it would work. So they built the platform, the platform itself is called Dealised, and Dealised powered Spreets, which is now the market leading group buying site in Australia and has been in Australia for two years.
At the beginning of this year, Yahoo bought Spreets, exclusively for Australia and New Zealand, so Spreets is now part of Yahoo and basically Dealised was spun off as a separate business. So, Yahoo said they didn’t want the platform, they just wanted the business. We took the platform and decided we wanted to do a white-label place, basically a wholesale place, to look for people who want to enter the marketplace. Obviously there are millions of Groupon clones, so we are not looking really to start them, but we are looking for people who have been impacted by the revenue growth of Groupon and LivingSocial.
So how do you see the Dealised coming into this space?
Here’s how we see the market evolving in 2010 is that it’s becoming pretty clear. You have Groupon and LivingSocial and then you have deals.com.sg and one or two others that are very big. And then really publishers, media companies and telcos that are getting into the space. They have never gotten into e-commerce before because they didn’t need to, but there’s an urgent need to now because daily deals sites are doing hundreds of millions of dollars that it is impacting their revenue.
The daily deals sites really have three core competencies: (1) they are trying to acquire customers, (2) they have technology that enables them to manage the whole process, and (3) they have merchant and advertiser relationships. Most of brick and mortar business have either an audience or they have merchant or both but they don’t have the technology.
So Dealised was created to be the solution to provide them with anything that is missing. What we have is the platform, the technology, and then we have two divisions — marketing services, which consults on customer relationships, and the technical business intelligence tools, which lets you understand and refine your direct marketing to your customer base.
Is marketing through daily deals a sustainable model?
I think it is the beginning of an evolution of a whole new phase of e-commerce. Right now, e-commerce is just come to my site, I’ll sell you a product. The difference between LivingSocial and the other traditional companies is that daily deal sites are hitting these people everyday with a deal, but there’s no targeting or segmentation.
So, if you want to be sophisticated the next stage is to get the more traditional players to be more sophisticated about it. They have got a brand that people understands. Take for example, Channel 9 in Australia. Australians understand what Channel 9 is, so when they send them a deal, audiences are likely to understand it. TV channels could also use programmes like Masterchef to send out branded deals to people so that if they are interested in what they see on the show, they can now buy them at a special deal.
And beyond that… what’s next for e-commerce?
This is a more evolutionary way of e-comerce. I see it going un-targeted — as we see now with Groupon — to a more traditional method where companies will use their brands and their assets to be more targeted and more sophisticated. Then, I think the medium goes mobile and then location-based. Our technology and our platform allows us to send an email to a mobile device for you to click through on that mobile device either by SMS, email through a browser or by an app.
There is also no loyalty to a Groupon or LivingSocial system. They have a roughly 80/20 rule where about 20% of the people that they spam are actuality buying and the 80% of them are just putting up with it. And I don’t think that LivingSocial and Groupon have any assets that enables customers to feel loyal to them.
If you are a newspaper readers or TV viewer, this is where the verticals come in. If you watch the Getaway program every week on Channel 9, you’ll subscribe to the Getaway deals seen on TV. So they are completely monetizing their programming in a way that LivingSocial or Groupon can never do. While these two created the group buying category, different companies in about a year will take different chunks out of it based on the interests and demographics of the location of people who initially signed up to Groupon or LivingSocial.
Tell us more about your recent funding round.
We have right now 15 different companies using our technology, most of them in Europe, one in the US and one in Dubai. We’re raising money for two things — one is to get into Asia, and the other is to keep developing the platform. We need to make sure that our competitors to Groupon and LivingSocial will have the same technology to play with.
The primary focus is mobile for the whole category, and given that Asia is primarily a mobile market and we have no competitor here, we decided that we’ll base ourselves in Singapore and focus on Southeast Asia, especially Indonesia, the Philippines, Malaysia, Thailand and India.
And again, if you can be very local with them, you can push a lot of micropayments through this. The telcos here are developing a lot of e-wallet type of applications, which is an incentive for them to drive mobile commerce. So, it just seems to us that rather than go head-to-head in the US with four or five other players that do what we do, we have a footprint in Europe and create one in this region.
What are your goals for Asia?
Basically getting our first mobile customer would be a nice present before Christmas for me, and I’d like to create two or three different models for different countries, leveraging our solution with local telcos or media companies. We’re looking for big players who need to get into the space, who have been impacted by Groupon and LivingSocial.
And realistically, with the exception of Singapore and Hong Kong, the other markets are lagging behind. Group buying is new in Malaysia and Indonesia so I think we have time to engage our target customer group with the solution that enables them to compete from an early stage. My goal in these markets is to find one or two players who can be a reasonably early mover and make the kind of new revenue stream that Groupon and LivingSocial are doing.
There are several ways to deliver on mobile: there’s apps, which isn’t important for us right now because people have to go to the app to find out what their deal is. The technology that we see is SMS in those markets where we can send people, based on their location, either an email or an SMS. Singapore’s execution would probably be MMS or email-based, while in Indonesia it is going to be very much SMS, where we would for example send an SMS in the village or that town saying these are the deals that are on today.
And then I think you have the apps becoming more sophisticated, becoming more of a push app. Right now, to get a LivingSocial app you have to download the app and you have to tell it the location and then you have to go look to see what deals are around. Our model is very much based on where you are, we will find you and tell you.
Have you established any local partnerships yet?
We have been talking to people over the past four weeks. We have plenty of discussions underway but we haven’t signed anybody yet.
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According to local report, Shanda is investing over RMB 2 billion (US$ 309 million) in ecommerce site iBuying.com with two other undisclosed participants. Founded by Ge Binbin, the former head of Goldcool Games, iBuying is set to debut in this Oct. Ge said that Shanda accounts for 40% of the total sum, or US$ 1.23 million.
This is a guest post by Doug Pierce, the co-founder and Head of Research at 
