Buytopia, ranked as the 6th top daily deals site in Canada, has just released information on which sites they have acquired over the past 6 months. Buytopia continues to seek further growth across Canada and their method of acquisition fits their growth plans. In some cases, it is less expensive to acquire consumers through acquisition of a deals site than it is to acquire them through online or offline marketing methods. Here is further information from our point of view concerning these acquisitions.
The sites purchased were: Price Dodger.com, Bargoonz.com, GoBabu.com, Indulge Living.com, GaggleUp.com and Dealivery.ca (the Buytopia PR wrote Dealivery.com, that was a mistake..it is actually Dealivery.ca) which was one of the leading deal aggregators in Canada.
- All acquisitions that Buytopia made were based on a CPA (cost per action) model. Meaning, Buytopia did not acquire any of these companies with cash. Instead they offered a commission to the owners of the company for every consumer in the database that purchased over a certain time period. So if 20,000 consumers in the acquired database purchased something on Buytopia, say over a 1 year period, then Buytopia would pay the owners a healthy commission on those sales. If the database did not buy during a specific amount of time, then the owners get nothing and Buytopia essentially purchased a business/database without having to pay for it. We will not publish exact percentages or other details of that nature.
- Although all companies would have preferred cash for their business, that is simply not feasible in this market at the present moment for smaller deal sites. The CPA model made sense for them because they had no choice and it gave them potential liquidity.
- Based on numbers I have seen in the industry and personal experiences, the CPA model favours the acquirer most. It is a very low risk proposition for them; only paying a commission to the owners if consumers actually buy over a set period of time .
- The CPA buyout almost always results in less money being transferred to the original owners compared to what they would have liked as fair market value for their business. It most cases, the owners could have received more money if they simply sold off the database. But most find the CPA buyout any easy and quick option, hoping that their database will indeed buy more deals from the acquiring company.
- Buytopia is not the only deals company to purchase companies on CPA. Almost all large companies have done so in Canada. The unwritten rule is as follows; if you are small (under 150k in monthly sales), in business trouble, or shutting down, then the company will only be purchased on a CPA method by Wagjag, Tuango, Teambuy or Buytopia. If you are larger and business is still humming (sales between 15ok-1 million per month) then cash or equity will typically be exchanged. The only firms generating over 1 million per month in Canada are Groupon, Teambuy, Wagjag, Tuango and Living Social at this point.
- Price Dodger. They essentially closed down before giving up their database to Buytopia
- Indulge Living: actually a good service from Vancouver generating decent revenues for a 1 city site. The owner wanted to focus on other investments.
- Gobabu; closing down and offering their database to Buytopia
- Bargoonz; do not know much about them
- Gaggleup; the investors lost a lot of money trying to grow Gaggleup. They even had a strong partnership with Canadian Tire, but that did not materialize into strong sales and certainly had its fair share of political/board room issues. Given the investors, the investment and partnership with Canadian Tire, it was very surprising to see Gaggleup only producing a small amount of sales per month, very small. As such, they shut down and gave up their database to Buytopia.
- Dealivery: they are a leading Canadian daily deal aggregator. They are owned by the same solid folks who operate Websaver and BAM Strategy. They accumulated a very healthy database size over the years operating Dealivery. Why did they give up the business to Buytopia? Simple, it did not generate enough revenue for them to continue focusing on it over their other initiatives. Although it did produce a good revenue stream, it was easier to have Buytopia operate it, take it over and own the database than continue operating it themselves.
Now, to be very clear, these 6 companies did not simply give up their business to Buytopia. The folks at Buytopia had to win the acquisition. they had to work for it. no doubt that other larger companies were approached (Wagjag, Teambuy, Dealfind, etc). But Buytopia won the right to acquire them. So kudos to Buytopia for offering these 6 companies a large enough incentive to choose them.
As the marketing continues to consolidate into only a few large players, those smaller daily deal sites will continue to seek some kind of exit. We are typically approached by 90% of the market asking for our advice. It usually goes something like this:
- Find an entrepreneur who wants your database or business and sell it to them for cash
- Offer it to the big companies, Wagjag, Teambuy, Tuango, Buytopia, on a CPA basis…they will NOT offer cash…unless for very rare reasons.
- Sell your database anywhere from 30 cents to $2 per email to those searching for that type of consumer and presently paying a lot more to acquire an email on Google and Facebook.
- You have a database already. That is the most expensive thing to acquire. change your business into an online reseller of goods and services to your audience. You can offer deal providers the chance to promote their deals to your database, while you receive a commission, say between 10-15% (essentially becoming a targeted deals aggregator), and also resell other goods just like an online ecommerce site. Again, you have the database, might as well leverage it.
Option 1 will generate more money but is difficult to accomplish. Option 2 will generate a healthy return if you know what you are doing. Option 4, well, not for everyone, but lets you keep and grow your business in another way and can be lucrative over time. But ultimately, option 2 is the quickest option for an exit, although it will most likely produce the smallest return. Nevertheless, if option 2 is on the cards, then if I were a small deal provider, I would most certainly contact Buytopia seeing that they are in the mood to outbid some other large deal sites for your database.
Congrats to Buytopia in acquiring those 6 firms. May the acquired databases be very fruitful.
BELOW IS THE ORIGINAL PRESS RELEASE FROM BUYTOPIA:
Canadian Daily Deal Leader Buytopia Acquires Six Competitors
Buytopia.ca Continues Organic Expansion without Raising Capital
TORONTO, May 29, 2013 /CNW/ – Buytopia.ca has acquired six daily deal companies – expanding to new heights when it comes to offering the ultimate buying experience to consumers at a discounted price. With these acquisitions, Buytopia will be offering more deals to a larger customer base than ever before.
In a six-month span, Buytopia has acquired fellow Canadian daily deal rivals Price Dodger.com, Bargoonz.com, GoBabu.com, Indulge Living.com, GaggleUp.com and Dealivery.com.
“We’re excited our subscribers keep growing – we now have over two million users,” says Anatoliy Melnichuk, Co-founder of Buytopia.ca. “Buytopia has grown organically without raising capital – this has forced us to be nimble and to work harder. Being the only profitable daily deal website put us in a unique position; we acquired respected industry counterparts to expand our Canadian reach.”
In Buytopia, these companies have found a partner to successfully build on their initial strategy and efforts.
“Buytopia’s acquisition of GaggleUp allows us to offer the best deals to our users,” says Martin Day, CEO of GaggleUp. “This is a huge win for our users because they will be exposed to diverse local deals and large national brands featured on Buytopia.”
Buytopia has garnered great success and recognition in the daily deal industry by launching group buying promotions with national brands such as Sears, Staples, La Vie en Rose, Cirque du Soleil and Netflix. Consistent national partnerships like these were the key driver for the six former rivals to merge with Buytopia.
“Buytopia’s strength is its reach across Canada,” says Simon Luu, founder of Indulge Living. “With the birth of my company in the west coast of Vancouver, I wanted my consumers to continue enjoying daily deals without provincial limitations.”
With this expansion, Buytopia seeks to continue acquiring competitors across Canada, and remains on the forefront of the Canadian daily deal industry.
About Buytopia: Since 2010, Buytopia has been offering the ultimate buying experience, to discover the best local services and products at 50-90% off. Buytopia features the best restaurants, spas, activities, events and hotels at a fraction of the price. For more information, visit www.buytopia.ca
SOURCE: Buytopia