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June 29, 2010

Flurry of deals around Group Buying

MediaNama, which recently had a roundup of online group buying services in India, has followed it up with an interview with Smile Interactive Group's Harish Bahl. Smile's joint venture firm Deals And You recently acquired group buying startup Wanamo. (This deal closely followed Battery Ventures and Grelock Ventures committing $8.75 million to another Indian group buying service, Taggle.)
There’s a lot of VC interest in this space, and that has largely to do with the success of groupon globally; they want to put money behind a working model. If you look at it from an India perspective, it’s a model that is very well suited – there is value for merchants and buyers, and a great marketing platform for services segment in the SME space. Finally, this is performance based marketing, and the Internet consumer in India is a deal seeker.

...The bad news is that this model has very low entry barriers. The good news is that it’s a model that is hard to scale

...GroupOn works on around 50% margins, and 30-40% margins is what this market might settle at.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports. Email the author at arun@ventureintelligence.in