Jump On It scores $5 million investment from LivingSocial, takes over local operations

The local daily deals market continues to grow, with group-buying site Jump On It receiving $5 million in funding from global player LivingSocial.

The development comes as the group buying scene in Australia becomes even more saturated, with a group of larger players including Jump On It, Cudo, Spreets and Scoopon all fighting it out for their share of the market.

Chief executive Colin Fabig says the company’s race for capital was triggered by the expansion of rivals, including Cudo, Spreets and Scoopon.

“Basically, we’ve started thinking about getting some money or strategic investment for quite awhile now, given that we have had some more competition from the major sites in Australia.”

“The biggest barrier to entry in this business is scale and capital, and to get that we need some money. So eventually we had two companies bidding for us overseas, LivingSocial and another company.”

Fabig refused to name the other company involved in discussions, but says Jump On It chose to work with LivingSocial due to the site’s “conservative” pace.

“They are steady, and we think it’s very much about Facebook versus MySpace. There are some sites like MySpace that are going at it full-speed, and then a site like LivingSocial which, like Facebook, is taking things slowly and plodding along well.”

The company will now operate the LivingSocial.com platform in Australia alongside the Jump On It platform as well. Fabig says this will differentiate the site from its competitors, as users will now receive multiple deals for their city.

The LivingSocial platform is one of the largest growing daily deals sites overseas, with over 10 million subscribers in 100 cities. Fabig says the company has been looking to build an Australian presence and the Jump On It team will handle operations here.

“You’ll be able to get deals for your city and then go out and get them locally, that’s what the two platforms offer us. A person may get multiple deals from competitors, but we are able to give them multiple deals from the one site.”

However, Fabig denies the competitors are even close to Jump On It, saying it is the biggest group-buying site in Australia. He says the site has over 700,000 users on its email list, (combined with the new LivingSocial platform), and that the company is on track to turnover $50 million for the year.

He says those subscriber figures are separate from the group’s Facebook pages, which have over 500,000 users.

Fabig also says the $5 million will allow the company to grow its staff from 50 to 150 over the next four months, with salesmen constantly looking for new deals and businesses to sign up.

“We think we are way ahead now, and with those two platforms we will maintain that position. The question is, how do we stay ahead? We think that offering multiple deals in your local area will keep us there.”

Players within the industry have said some natural consolidation will begin to occur soon, with multiple sites now offering daily deals. But Fabig says while some smaller sites will start to drop away, the bigger sites will remain.

“Perhaps the smaller sites will fall away but the bigger sites will stay here. The opportunities for the merchants are great, because why take the risk of putting an ad out there when you can put a deal up on a daily deals site?”

But the biggest player in the market is still yet to enter. Groupon is targeting Australia for an international expansion and says it will either enter here organically or through an acquisition.

But Fabig says Groupon is too far behind the local players.

“To be honest, I think Groupon are behind and they are going to have to buy a company. They are behind in terms of penetration and I don’t think it’s a good idea to start from scratch.”

“Also, I don’t think this market is important to them. They’ve been in bigger markets, and they’re dominating Europe, so what does it matter? They are doing well, and Australia is pretty small.”