Microsoft and PBL launch group buying website, take aim at SME competitors

New discount website Cudo will aggressively try to win market share and beat out a flood of SMEs trying to build footholds in the coupon and group-buying space, chief executive Billy Tucker says.

The site, which is a joint venture between Microsoft and PBL, comes after the recent launch of several coupon and group-buying sites, including OurDeal, Jump On It and Scoopon, who are trying to capitalise on the success of market leader Groupon in the United States.

Tucker says the model has been proven to work, and work very quickly, and Cudo will be striving to beat out competitors in a rapidly expanding and popular market.

“What I’m seeing from a lot of businesses in this area is that they’re in it to make a fast buck. I believe we’re in this for the long haul and we want a dominant position in this market. We will evolve our business to be more personalised, and become more tech driven over time.”

Many of the established group discount businesses are vying to attract web-savvy consumers. Instead, Tucker says Cudo wants the average consumer on the street, and as such will be advertising through the PBL network including ACP magazines and Ninemsn.

“We need to take the lead in a short order. The vision for us is to go hard on advertising, so we’re on TV today, we will be in magazines and we are using every opportunity we have to promote it, because we need to take a commanding position very quickly.”

“We want the mainstream market. If you walk down the street, talk to a group of people about group buying, they’ll have never heard of it. That’s the audience we’re talking about and that’s who we want.”

Tucker won’t reveal the company’s revenue targets, but says with Microsoft and ACP behind the venture, they expect a high level of success.

The site will offer discounts for experiences including restaurant purchases, day spas, and “adventure activities”, with price cuts of up to 80%. Sydney and Melbourne offers are already available, with a roll out to Brisbane and other key holiday areas to begin from October.

The concept works by having groups of users sign up for a discount provided by a business. Once a certain number of people sign up, which could be as high as 300 or as low as 20, the discount is activated. If too few people sign up, no one gets it.

The group buying and discount market is led by Groupon in the US. The site, which has received funding Digital Sky Technology and Accel Partners, is valued at about $US1 billion and expects $US400 million in revenue this year.

Australian companies including Scoopon, Jump On It and the newly released OurDeal all hope to enjoy the success of a fast-growing and lucrative business model. Veteran investor Roger Allen even pumped $1.3 million into Jump On It earlier this year, saying the group coupon sector is based on a solid model that can produce revenue relatively quickly.

“It’s a combination of the market opportunity, the business model and the likelihood customers are going to take it up. You see a lot of technology around that looks good, but is slow to build up revenue and takes a long time to sell,” he told SmartCompany at the time.

The development of group buying comes as coupon sites like Retail Me Not have established a niche for themselves in offering single discounts to single customers. But coupon social networking service Myzerr chief executive Slade Sherman says the two offerings are completely different.

“Their concept of ‘group buying power’ is based on enough people taking up the deal in order to activate the deal,” Sherman says. For example, if 200 people from the list respond then the deal is activated.

“So the group have no relationship other than the fact they are individuals that subscribe to the Groupon mailing list and have chosen to take up the offer.”

Sherman says the sites integrating some type of social aspect, like Groupon, are the sites that will perform better over time.