DAILY DEALS TO DEALS OF THE DAY THE

DAILY DEALS TO DEALS OF THE DAY THE RETAIL PHENOMENA AND/OR MARKETING CURSE* *PRESENTATION PRIMARILY FOCUSED ON PRODUCT RELATED OFFERS Michael Romanies FUEL Marketing and Sales Mike. R@FUELmarketingandsales. com © Michael Romanies, 2012

THE BEGINNING Woot. com (Want One Of These) Ø Site Started in 1999 Ø Acquired by Amazon 6/30/2010 (Est $110 M ‘ 09) Ø One Deal per day Ø Web only through 2011, then e-mail long after Groupon Ø Channels added Ø Sold 1 M t-Shirts in first 18 months, single press Ø Woot. Offs and Bags of Crap Ø Woot, Yugster, Tanga, Deniath Ø Amazon Gold Box & Lightning Deals (acquired Woot)

THE TRANSITION The Nerds are overtaken by the Marketing Guys (e-Mail Solicitation, then the lines BLUR)

PYRAMID POWER Groupon Living Social, KGB Eversave a. Dealio, Moolala, Morgans List Revenu e

DEALS OF THE DAY SITES – THE MARKET The Players Ø The 80/20 Rule ØGroupon (39 M+/49 M+ domestic emails, est ~90 M WW) ØGoods 39 M+, Grouponicus 29 M+ ØLiving Social (60 MM+ World Wide e-mails) ØKGB, Ever. Save, etc. all claim to be #3 Ø 1, 500+ sites in 2011 ØBig Fish Entering ØGoogle ØRogers Communications ØCBS ØFacebook – DOA

DEAL OF THE DAY SITES – THE RIGHT “RETAILER” The Players cont. Generalists Groupon, Living Social, etc…. Themes Groupon Goods, Getaways, etc. Niche Players Gilt Group Totsy Mommasource Deniath Oh yea – Amazon & e. Bay

GROUPON – THE KING OF THE HILL Groupon ØStarted Oct. 2008 ØBy Dec. 2010 – 175 Domestic markets + 47 Countries, 33. 7 MM subscribers ØRejected $4 BB and $6 BB offers from Google ($2 BB revenue at the time), Mid 2011 ØNov. 2011 IPO Valuation of $12. 8 BB raising $700 MM, Currently under $3 BB Market Cap ØGroupon Goods Ø~ Sept. 2011 – Test – first e-mail achieved estimated $2 MM Revenue ØEstimated 2012 Revenue of $600 - $800 MM ØBy Comparison ØGroupon 2011 Revenue $1. 6 BB (Billings of $4 BB) ØAmazon 2011 Revenue = $48 BB with projected 2012 at $64 BB ØLiving Social Shop (Goods) is projected to hit $200 MM in 6 months this year ØGilt Achieved a total of $500 MM in 2011

GROUPON – THE GROWING AMOEBA Groupon (The Deals of the Day) Regional Offers Groupon Getaways Groupon Goods (1/wk to 3+/wk) Groupon National Groupon Now! Groupon Gifts And then there’s Canada. . Groupon Regional Offers -Quebec Groupon Goods Canada Canadian National Groupon

IMPLEMENTATIONS REDEMPTIONS Redemptions Voucher Codes – Services / Products Offer Period Voucher Redemption Period Redemption Post “Redemption Period” & Valuation “Stored Value”, “escheatment”- Abandoned Property Special Case - “Now Deals” Daily Cut-off, “sales” are NET redeemed and verified Product Redemptions Delivery, POD, Tracking, Response Times

(½ OF ½ …. )^3 AKA THE DEAL The Mantra’s Big. Lots!: “Name Brand Products at Discount Prices” Tuesday Morning: “Branded products at Savings of 50 -70%+ to the consumer” DOD Sites: “Deals at 50% or More off” As Fast as Amazon** Branded vs. Unbranded products and services Effect Discount and Margin Effect Sales Product/Service Categories Effect discounts and margins and delivery expectations

DEAL “SKINS” Daily Deal/Deal of the Day Durations of Sale Duration of Redemption Un-redeemed – Dead or the Undead Zombies “Run of Sites” Discounted Currency Catalogs (emerging) Complimentary Offers (emerging) Niche’s expanding – Themed Offers

CAVEAT VENDITOR (SELLER BEWARE) VENDOR CONSIDERATIONS AND GOTCHA’S Pricing The Discount (consumer) “Marketing Services”, “Commissions”, etc. The Hidden Fees CC Fees (on the DEAL value – 2. 5 -2. 9%) DFI’s “Pick-up” Returns Allowance Taxes Returns and Cancellations (Quick Redemptions) Cash Flow “Lost” Shipments

CAVEAT VENDITOR (SELLER BEWARE) - 2 VENDOR CONSIDERATIONS AND GOTCHA’S -2 The Title Whose Sale it is? Exclusivity Region Bundle/Price Time Period Redemption Period of “Deal” Residual Value Voucher Redemption “Late Returns”

OTHER CONSIDERATIONS – KNOW WHO YOU ARE DANCIN’ WITH Demographics M/F Groupon vs. Amazon Age Income Region Loyalty & Up-sells List Games (Amazon TOP XX) Post Sale Halo Sales Negation of Negative Reviews Brand Bragging

DEAL INGREDIENTS – RECHECKING THE RECIPE Inventory (Physical, Time & Resources), Availability Deliveries and 3 PL Pricing, Margins, “Packages & Bundles” The Terms (Tips, Hours/menu restrictions, etc. ) The “Up Sell” “Recurring Revenue” Opportunities Cash Flow Delivery Out of Pocket Receivables Cancellations Currency & Taxes – Oh Canada!

WHY ME (YOU)? Customer Acquisition Cost Annual or Perennial? Launch - Sampling Overstock (Inventory Limits) Out of Season Fashion Changes Holding Costs“ “Seeding” next year Up-sell opportunity “Grill” – Only Menu items no Bundles “Older” versions Marketing Expense - Advertising

WHY ME (YOU)? – 2 THEIR PITCH Customer Acquisition Cost Branding (Brand Advertising vs. Transactionary Advertising) They (vendors) are paying a premium for PPC, Key Word search, emails, etc. just for 'eyeballs'. Groupon delivers that kind of exposure + actual buyers at either a fraction of the cost, and is the case with high margin businesses (software, subscriptions, printing, many services, etc. ) even doing a huge profit. Most businesses put a $ value on acquiring a new customer because they know the repeat buying habits will yield X ROI. The cost of acquiring a customer through Groupon is always a fraction of that value and that doesn't take into account the number of 'eyeballs' from people who didn't buy the deal. In most cases, Groupon is a windfall for businesses (especially online businesses) looking to generate brand awareness and word of mouth.

MY CRYSTAL BALL “Legislation & Litigation will solve all of the grey areas within 2 years” (Michael Romanies © 2010) Consolidation & Specialization “Channels” “Too big to fail” = “Too big to continue the growth rates” at status quo Features for “up” and cross-sell (Netflix, Amazon) “Niche” Database Mining & Niche e-lists go deeper & wider 3 PL goes Regional (Amazon, Google announcements)

EXAMPLES Honestetch VHS to DVD: a TOP 100 Deal Site Product (Yipit) Groupon, Living Social, KGB, Eversave, Google, Deal. Find, Deal. Save, Moolala, AAA/digistrative, Daily. Deals, Spotlight Denver, Deal. Genius/Ebay, Amazon Honesetch Audio Recorder Deluxe/Plus, Film Scan & Save The Clicker – Universal Remote w/Bottle Opener Groupon, Google Serif – Graphics Software (Digital Download) Groupon, KGB, r. Deals, Google Total Training – Training (Web Subscription) Secret Styler – Fashion Accessories Nitro Strike – Fire Extinguishers Bottle. Boss – Wallet Credit Card Bottle Openers

DAILY DEALS TO DEALS OF THE DAY THE RETAIL PHENOMENA AND/OR MARKETING CURSE Michael Romanies FUEL Marketing and Sales Mike. R@FUELmarketingandsales. com