Groupon said to buy a Canadian Daily Deal company

We have been rather quiet with our posts over the past 2 weeks. Partly due to vacations, but mainly due to the fact that we did not want to write about the same old content that most sites are writing about concerning the daily deal space. Quite frankly, there is just so much we can all take concerning whether Groupon goes IPO this month, next month or never.

On Friday, we noticed that Techvibes wrote a post on how Groupon was about to buy a Canadian Daily Deal company. One from Vancouver. And so, yes, we are now interested in commenting. Here we go.

Should Groupon buy a Canadian Daily Deal site in order to bolster their position here? Yes, they should.

Presently Groupon leads the country as the #1 daily deal service. However, Wagjag is closing in on them as the #2 site. In fact, it seems that Wagjag outsold Groupon in the province of Ontario for the month of August. Beating them for the first time. Wagjag, however is not as strong in Alberta or the prairies.

Also, as we previously wrote, Groupon is nowhere near first place in the province of Quebec. They are 4th, sometimes fifth. The distinction of being first belongs to Tuango. (Torstar owns Wagjag and owns a piece of Tuango btw).

The top sites in Canada are: Groupon, Wagjag, Dealfind, Teambuy, Living Social, DealoftheDay (yellow pages), and Tuango. See the breakdown by province here

Despite Groupon still being number one across the country, the competition in Canada is getting stronger.
-Teambuy is on a tear, aggressively increasing their revenues over the past 2 quarters.
-Wagjag is very competitive with Groupon in Canada’s #1 market of Ontario and continues to heavily invest in customer acquisition.
-Dealfind continues their strong numbers across the country, especially in Toronto
-Social Shopper does well in Vancouver
-Tuango is killing it in Quebec
-Living Deal has significantly increased their numbers over the past few months
-As mentioned, Groupon does poorly in Quebec (although much better over the past 2 months)
-and media companies are finally entering the space slowly but surely (Rogers, etc)

As such, who should Groupon buy? Should it be,  as Techvibes mentioned, a Vancouver based company?

Our take, absolutely not. We do not see any Vancouver based daily deal sites being on a level that would benefit Groupon across the country. There are only 3 companies that we would recommend Groupon Buy in Canada. We will mention them at the bottom of the post.

As for Daily Deal sites from Vancouver:

Ethical Deals: ok sales, but why would Groupon bother? This does not improve their position

Indulge: Does not improve Groupon’s position

Grooster, Golow, The Daily Steal, Deal101, Kooperz, Tastygo, hojojo, edailyquest, friendsave and Redrocket: These are all way too small for Groupon to care.

Offeron: Has traction, but again, will not help Groupon across the country

We would only recommend two companies in Vancouver that Groupon may be interested in, but none of these two will help Groupon across the country. The first is Social Shopper. They have produced some real good numbers over the past few months and only run deals in BC. If Groupon buys them, then it would add about $2-$3 million in sales to Groupon just in BC, but it will do nothing for them for the rest of the country. The other company I would recommend would be Surrey. Only because it focuses exclusively on Surrey and does a good job driving purchases in that community. But it is a small service and will not do anything for Groupon anywhere else in the country.

So who would I recommend Groupon Buy instead? The companies I would recommend must either have coast to coast coverage or have such a significant advantage for Groupon that they must be looked at.

1. Teambuy: They are 3rd and sometimes in 4th place across the country. They have a good brand and good presence in all major cities. Of course their major market is Toronto, but they still do a good amount in Montreal (french speaking population). Since getting a round of investment earlier on in 2011 they have been aggressive with marketing, customer acquisition, product development, all leading to a growth in sales.

2. Dealfind: They were Canada’s number 1 site in certain months, but they are typically 3rd or 4th across the country, fighting it out with Teambuy. They are 6th or 7th in Quebec though. Dealfind will be expensive for Groupon to buy, (they got 31 million in funding in 2011) but will give them a tremendous lead over Wagjag in the country. Buying Dealfind will also give them some of Dealfind’s sales in their US cities. But that would be irrelevant to Groupon. Dealfind’s Canadian numbers, especially in Toronto, are quire good.

3. Here is my main recommendation. The one company that will give Groupon a significant advantage in Canada is……TUANGO. Yes, that’s right. If Groupon wants to make an impact, then they must buy a company that just dominates the Quebec marketplace. Tuango pulls in $15-$20 million just in Quebec and most in Montreal. Why? because they get it. They get the market place. They get the culture and they get the difference between English Montreal, French Montreal and Bilingual Montreal. Groupon has struggled in Quebec since entering the market and does, at times, 5 times less volume than Tuango does per month. Groupon can easily increase their sales in other Canadian cities by investing more on marketing, partnerships, outreach, etc. However, increasing their numbers in Quebec to the point of reaching Tuango’s will be a long and expensive process for them.

Final thoughts:
If Groupon in indeed looking at buying a site in Canada, then we recommend that Groupon purchase both Tuango and a site that is strong on the west coast.

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