April 29, 2011, 11:36 AM

Now slowing down here: Daily-deal firms make their own deals to spur growth

Like the fast pace of the online daily-deal business, the companies behind the deal sites are racing to gain an edge in the market.

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Living up to its name, the online daily-deal arena seems to never let up—not only in pitches every day to consumers, but in new deals the daily-deal operators are closing as they vie for position in a fast-growing market.

And like the fast pace of the business, where consumers race to nail down the current deal before it's gone, the companies behind the daily-deal sites are racing to gain an edge. One way is through geolocation technology.

Take Groupon Inc. The daily-deal site that effectively created the category is feeling the pressure of rising competition. Last month it acquired Pelago, the developer of the Whrrl location-based service that lets retailers pitch offers based on where consumers happen to be at any time, such as a discount for a coffee shop down the street. It also lets consumers share with friends Whrrl's recommendations on where to shop.

"It's all about discovering what you didn't know you didn't know, right in your backyard," Groupon CEO Andrew Mason says. Groupon's mobile app also features Groupon Now, which lets users click "I'm hungry" or "I'm bored" to receive pertinent offers based on their location and the time of day.

Other players are also stepping up their daily-deal game. Google Inc., which tried unsuccessfully in December to buy Groupon, plans to launch Google Offers, which will offer daily deals of 50% or more off the price of consumer products. The service is kicking off this spring in Portland, Ore., before expanding into New York and San Francisco.

LivingSocial, Groupon's nearest rival, has teamed up with Next Jump to make daily deals available to potentially millions of consumers who participate in loyalty and rewards programs Next Jump operates for clients including MasterCard Worldwide, Dell Inc. and Hilton Hotels. "Next Jump had an unequaled network of loyal shoppers who will now have access to our handpicked daily offers and experiences that introduce them to the best local merchants," says LivingSocial CEO and co-founder Tim O'Shaughnessy.

Time Bomb Deals, with the tag line "The deal of the day is so yesterday," is out to raise the bar in daily deals with running times lasting from as little as 15 minutes to as long as 12 hours. It lets merchants set the length of time and number of offers, and it charges a set fee instead of the more common percentage of the price paid by a shopper. Groupon, for example, typically takes a 50% cut.

zak@verticalwebmedia.com

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