The news of Dealdey‘s acquisition by Ringier Africa Deals Group, a newly-founded joint venture between Swiss Ringier Africa AG and South African Silvertree Internet Holdings (Pty) Ltd has pervaded the tech ecosystem. Nothing or little for the Internet business community is be to held on to as to how much the deal was.
According to people with the knowledge of the matter, Dealdey was said to have been sold for a mere $5 million. This is a huge gap from $75 million owners of Dealdey offered to sell the daily deals site.
Dealdey’s problem is a pot-pourri of many factors. Competition and an outdated business model are chief among them.
It started with the launch of Konga and Jumia ended up relegating Dealdey to the fringes of small daily deals. Also, the line between daily deals and eCommerce as it is done by the two arch-competition gradually blurred-out. While the ‘giants’ fought for market share, it is unfortunately the grass ‘Dealdey’ that suffered.
To save itself, Dealdey should have changed its business model, by going into full scale eCommerce, because the market was still developing. Dealdey already had the structure and systems that could fit in. The site would have become the third alternative to the duo of Jumia and Konga.
Groupon [NASDAQ:GRPN], the poster-child for discount selling, which Dealdey literally-copied has also faced similar challenges.
Erin Grifith wrote in Fortune magazine that “Groupon is a company that has to overcome a bad business model.”
Erin, went ahead to say “The problem with both of Groupon’s businesses are the barriers to entry, or lack thereof. With daily deals, anyone could buy a “build your own Groupon” software package (from a company called Groupon Clone, no less) and start selling coupons with cute emails. In the height of Groupon-mania, many did just that, driving Groupon’s customer acquisition costs sky-high and forcing Groupon on an aggressive acquisition spree to take out regional competitors. At the height of the boom there were hundreds of daily deals startups. Groupon bought more than 30 of them. Now Amazon is moving in with its “Amazon Local” competitor. And Groupon Goods is already competing with Amazon”
This is the same problem Dealdey faced. The company failed to change a business model that was failing the biggest company that started it. As to what Ringier would do with Dealdey, it is left to be seen.
Ringier had dabbled into daily deals when it started ClickSell in 2009. It was later shut down. Buying Dealdey is surprising and analysts are on the look out if the company has a magic wand to turn around the business.