Groupon Woos Merchants as LivingSocial Looks Smarter by the Day

Having established itself as the leading brand in the daily-deal space, with its jaw-dropping IPO in November giving it the edge over LivingSocial, Groupon is committed to growing and innovating to return value to its shareholders. But it was dealt a blow Monday when a study was released that shows that businesses that have worked with Groupon aren’t planning to offer any new deals in the next six months, according to the San Francisco Chronicle.

As Forbes comments, Groupon may be chasing a $25 billion mirage unless it can cement its relationships with the businesses who form the backbone of its offers. Overall, the industry is expected to double to $4.17 billion by 2015, according to researcher BIA/Kelsey. However, the biggest challenge is that companies aren’t seeing the repeat business they expected from consumers who came in for earlier deals. That news has sent Groupon’s shares below its initial public offering price of $20 on Nov. 3rd.

While it isn’t good that half don’t want to offer a deal in the next six months, the survey did provide some good news as well for daily-deal services, a category that saw Google Offers launch last year: 80 percent of the survey's respondents were satisfied with daily-deal companies, the Chronicle reports.

"It shows the vast majority of merchants who have run deals are happy with their experience, and nearly half plan to run another deal in the immediate future," commented Brendan Lewis, a spokesman for LivingSocial, to the paper. "You'd be hard-pressed to find an 80 percent satisfaction rate among merchants for any other marketing channel in use today."

LivingSocial’s decision last year to not go public just yet and instead seek investment dollars is now looking pretty savvy. “Staying private has allowed LivingSocial to shore up its finances without the scrutiny of the public markets,” the Chronicle notes. “Groupon, meanwhile, has been criticized for its ballooning marketing expenses, which have led to rising losses.”

Undeterred, Groupon continues on a talent acquisition spree, and has been trying to better engage merchants with enhanced analytics to better share marketing insights and demographics information on campaign its partner dashboard, as announced in a new year's message on the company blog (and seen in a screenshot below) ... so don't (dis)count it out just yet.