December 14, 2011, 10:45 AM

PayPal is set to enter the mobile daily deal market

An analyst says the eBay payments arm could become a deal aggregator.

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Another large e-commerce player is poised to enter the crowded field of daily deal offers. PayPal, the payments arm of eBay Inc., reportedly plans to start offering daily deals in the first quarter of 2012. Neither PayPal nor eBay immediately confirmed that report, which said the online coupon service would rely on PayPal’s knowledge of its users’ preferences to offer tailored deals to consumers’ smartphones and locations.

That kind of market know-how could give PayPal an edge in the daily deal industry, which will attract $4.2 billion worth of U.S. consumer spending in 2015, up from $873 million last year, according to a recent projection from BIA/Kesley, a market research firm. PayPal claims 103 million worldwide users but does not break down its U.S. membership.  PayPal’s revenue in the third quarter stood at more than $1.1 billion, of which $552 million, or roughly 50%, came from outside the United States, according to eBay financial reports.

“PayPal has a very large user base and has the potential to succeed with local and retailer offers,” Greg Sterling, founder of Sterling Market Intelligence, tells Internet Retailer. “However, success isn't guaranteed. It would depend on the quality and types of offers.”

The daily industry includes more than 600 discount provides, BIA/Kesley says. Groupon and LivingSocial lead the pack but companies that range from newspaper publishers to flash-sale site operators to deal aggregators also take part, the research firm says. As well, Google Inc. launched its daily deal offering in May and continues to expand the service, called Google Offers. Amazon, a major investor in LivingSocial, also provides local discounts through its AmazonLocal service. 

That field is sure to narrow as some companies fail at daily deals and others consolidate, Sterling says. “The market has the ability to support numerous players but not the hundreds that currently exist,” he says. “My guess is that PayPal would become an aggregator or distributor of third-party deals. Building a sales channel to source local deals is an expensive and challenging proposition.”

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