Groupon Clones Struggle to Compete, but Are Ripe for Acquiring
While daily deal clones may not have a chance competing against the giants in the space, they still have a good chance of being sold. — A study by the 451 Group's M&A KnowledgeBase found that so far this year …
Context & Ripple Effects
The clone question has been building for months: Yipit's June tracking already showed Groupon ceding daily-deal share to LivingSocial, and TechCrunch argued back in October 2010 that the category lacked the network effects behind the "no Ebay" comparison — meaning scale alone wouldn't crown a winner. Against that backdrop, the 451 Group's M&A KnowledgeBase reads the year's deal flow as evidence that copycats unable to compete head-on still clear an exit path.
The thesis is playing out in real time alongside the article: LivingSocial's purchase of Ticket Monster, South Korea's biggest deals site, shows exactly the buyer profile the study describes — a top-two player using acquisitions to buy geography instead of building it.
First-order effects
- Clone operators facing Groupon and LivingSocial's marketing spend now have a realistic strategic fork: sell while valuations hold, or burn cash in a market where the leaders are pulling away.
- LivingSocial's Ticket Monster acquisition gives it immediate leadership in South Korea, validating tuck-in M&A as cheaper than organic international expansion.
Second-order effects
- Groupon and LivingSocial are pushed toward a consolidation race — each clone bought by one raises the price of the next regional leader the other wants, turning struggling copycats into contested assets rather than distressed ones.
- Investors who funded clone launches shift from growth expectations to exit-timing expectations, repricing new daily-deal startups on acquisition probability rather than standalone economics.
Third-order effects
- If the pattern holds, local daily deals consolidates into a two-platform structure where the only viable strategies are being Groupon, being LivingSocial, or being acquired by one of them — with independent clones effectively eliminated as a category.
- The exit window also signals how quickly a hot consumer-internet category matures: less than three years after Groupon's model spread, the follower tier is already being harvested by the leaders ahead of any public-market reckoning for the space.
The trend: Daily deals is consolidating around two dominant platforms, with regional Groupon clones converting from failed competitors into acquisition currency for the leaders.