BI Intelligence: Trouble In The Flash Sales Market? You're getting this email because you're signed up to the BI Intelligence beta mailing list. To get access to the site, please complete your registration and sign up for a free 30-day trial. Trouble In The Flash Sales Market? US flash sales leader Gilt Groupe is laying people off, restructuring and scaling down its operations, according to one unconfirmed report. Gilt Groupe has been expanding in many verticals beyond its original women's fashion business, and it makes sense that some of them wouldn't work, and that it should cut back. What's more, Gilt must be feeling the competition from competitors focused on some verticals, like One King's Lane and Fab.com in home decor. So this might just be a hiccup. But, there's a broader question, which is: can a flash sales site, whose appeal is at least partly based on the entertainment and impulse value of the purchase decision, expand in many verticals? We spoke with one of the co-founders of Vente Privée, the global leader in flash sales, who doesn't think so. Six months ago, he told us he thought Gilt's expansion would fail--as, of course, he would, given that Vente Privée and Gilt Groupe compete directly, but laying out an interesting rationale: the reason Vente Privée works, he said, is that it's just one site with one list. People don't know if they're going to get a women's fashion deal, or a men's fashion deal, or a décor deal, or a gourmet deal, or a local deal. It's that surprise that generates the excitement and impulse decision to buy, he thinks. Vente Privée has put its money where its mouth is on this, vowing to stick to the one-email model, and Gilt has gone in the radically opposite direction, and this approach seems to, at least, be going through turbulence. It might just be turbulence. But, if the Vente Privée people are correct, the multibillion online flash sales market could see a shakeout and look much different a year or two from now. You can also read our interview with Vente Privée USA CEO Mike Steib here → In other news... Prices for online display ads continue to decline as real-time bidding platforms make digital ad buys more efficient, according to two digital marketing firms interviewed by Stifel Nicolaus. Google's ad exchange saw spending jump 105% year-over-year in Q4, while total display spending increased only 9%.Stifel analyst Jordan Rohan interviewed SEM firms IgnitionOne and Kenshoo. Here's what they said about display: "Advertisers continue to shift budgets to real time bidding (RTB) as a more cost effective medium. Google’s AdEx continues to outpace the market with spend on the exchange up 105% y/y. For total display, spend increased 9% y/y, which is a deceleration from the +23% y/y increase in 3Q. CPMs declined 17% y/y (less worse than -23% in 3Q). Impressions increased 32%, a deceleration from the 51% growth seen in 3Q." Mobile search ad impressions and spending are growing rapidly, according to two search engine marketing firms interviewed by Stifel Nicolaus. The firms said about ~10% of spending came from mobile, versus about half that a year ago. Conversion rates, however, are still much lower than PC-based searces. Jordan Rohan of Stifel Nicolaus interviewed SEM firms IgnitionOne and Kenshoo about search spending in Q4. Both reported that mobile search impressions and spending are growing rapidly. Importantly, however, conversions are significantly lower than for PC-based searches, especially on smartphones. It is important to note that much of this spending may be shifted from the PC rather than incremental. Mobile devices make search more convenient, but they don't increase the spending power of those who own them. And some of the searches that lead to purchases on mobile devices might otherwise have led to purchases via PCs. Here's Jordan Rohan's summary: IO saw mobile ad impressions up 317% y/y with spend up nearly 270% y/y. In the fourth quarter, retailers that work with IO allocated 14% of total search budget to mobile vs. 5% a year ago. On Black Friday alone, 24% of spend was on mobile. Kenshoo saw 8% of all paid search ad revenue come from mobile devices in December. Conversion rates for tablets of 2.72% still lag PCs at 3.48% while mobile conversions still remains low at 0.87%. Showtime is rolling out Showtime Anytime to let subscribers stream hundreds of television episodes and feature films over the internet. Modeled on rival HBO Go, the move indicates content producers are finally coming to grips that the internet is central to future distribution. "Ad-supported mobile content revenues in the US will surpass $1 billion" by 2015, according to eMarketer. Big numbers mean big opportunities-- and the mobile sector has plenty of room to grow as more and more consumers use smartphones to access multimedia content. Six big hotel chains build a joint venture hotel search engine, Roomkey.com. These kinds of online joint ventures have a terrible record, but hotel search and booking is one of the most profitable online businesses, so there's a lot of money to be made there. It's what makes Priceline so profitable, as we show in our explainer on the company → Through the holiday season, Android had 700K activations per day during the holiday season. There are now more than 200 million Android phones around the world. On Christmas Eve/Christmas Day, 3.7 million Android devices were activated. Google chairman Eric Schmidt believes that Android is well on the way to the one billion device threshold, he said at CES. (Via Macquarie analyst Ben Schachter) Amazon-owned Quidsi bought the domain name Casa.com, suggesting it might be working on a home decor e-commerce site. The home decor category has been exploding online, with sites from Gilt Home to One Kings' Lane to Fab.com. More broadly, we think 2012 will be the year of the "category killers", companies that own e-commerce verticals → Yahoo search market share keeps declining, ending up at 14.5% for December 2011, compared with 15.1% in November 2011 and 16.0% in December 2010, according to the latest comScore numbers. Facebook is rolling out ads into users' news feeds. This is a potentially huge opportunity, as the News Feed is the center of the Facebook experience; what's more, the "featured stories" will be from brands users are fans of on the network, i.e. have opted into receiving messages from them. PayPal processed $4 billion in mobile payments in 2011, an enormous jump from $750 million in 2010, a number which shows the huge potential of the mobile payments market. Google ended 2011 with its search market share at a new high for the year, according to data from comScore. The data doesn't even include mobile queries, where Google is thought to be even more dominant. Feedback? Questions? Send us an email Please follow BI Intelligence on Twitter. | 
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