Fairfax moves into group-buying space, LivingSocial discusses multi-million dollar investment

Fairfax has dipped into the group-buying craze, with one of New Zealand’s largest auction sites launching a sister operation that will offer discounted deals for experiences, following the lead of US giant Groupon and its army of clones.

The development comes as a new report from the United States says Groupon competitor LivingSocial is in talks with investors to raise $US500 million that would value the group buying site at $US2 billion.

The Treat Me opening highlights the global reach of group buying, as more sites tap into a number of different nations across the world, including those in Europe and Asia.

Sam Yip, senior researcher at Telsyte, says the approach of these different companies will need to change as they spread across different markets.

“You have to think about the way countries are laid out. If we think about Australia, we have lots of land and our capital cities are all spread apart. There is an opportunity for a small niche site to get a good hold on one certain area.”

“If you compare this to Asia, where everyone lives in high-rise apartments, services and products are within an arm’s reach and so on. Group-buying might not work as well there as it would over here.”

The Treat Me site is designed as a sister-site to Fairfax-owned Trade Me, with chief executive Jon Macdonald saying the site was built in order to take advantage of the success of Groupon.

Trade Me founder Sam Morgan sold Trade Me to Fairfax back in 2006 for over $600 million – it is one of the country’s largest and most popular websites. The deal made him one of the country’s richest men.

“Thanks to businesses like Groupon, coupons and vouchers are back in style. In New Zealand, several sites have sprung up seeking to capitalise on this social eCommerce. With the market still in its infancy we’re confident Treat Me will appeal to Kiwi advertisers and buyers as a place to find a great deal,” Macdonald said in statement.

Deals will be launched in both Auckland and Wellington initially, with the site to be run as a separate unit by James MacAvoy. The company promises expansion within the next few months, and says deals will be offered for a number of restaurants and experiences.

MacAvoy is clear about the site’s intention – it wants to offer experiences, rather than actual products or goods, as opposed to some other daily deals sites such as Woot or Australia’s Catch of the Day.

“Treat Me’s focus is on offers from businesses that provide a great service or experience, rather than tangible goods.”

Yip says the expansion of such sites overseas clearly shows there is opportunity in the market, but as sites move into different markets they will need to consider new strategies.

“We’re starting to see deals broken up into tiny locales as well, such as South Melbourne, and East Melbourne, and so on. That is going to change… you may see that hyper local versions may work in some areas and not in others.”

Meanwhile, new reports claim LivingSocial is in talks regarding some major investments. Both the Wall Street Journal and Bloomberg have said the site is seeking up to $US500 million to expand its operations.

The reports come after LivingSocial won several million from Amazon in a funding round late last year.

The company is growing quickly, and is beginning to challenge Groupon as a serious competitor. It has also begun expanding overseas, including in Australia where it provided Jump On It with a $5 million investment.