A trio of Dartmouth MBAs are setting their sights on Boston as the starting point for their young Internet company. CoupFlip, whose Web service is open to the masses as of today, is creating a marketplace for consumers to buy and sell daily deals quickly and efficiently.
Before you say, “Not another deals site,” well, go ahead and say it. But after an initial phase of land-grabbing, followed by consolidation, the pendulum of popular opinion has swung far enough the other way—a lot of people are sick of hearing about new deals and services—that there might actually be an interesting business here.
The idea is to give consumers a fast way to sell deals they don’t want to use, and buy new deals at a discount. The key here is fast. CoupFlip’s algorithm figures out on the fly how much a deal is worth as soon as you submit it, based on things like Yelp reviews of the establishment, how well the deal sold on the first day, and so forth. (This involves the science of dynamic pricing.) CoupFlip then pays you for the deal, and other consumers can go pick it up online. As for the size of the deals pool, something like 30 percent of Groupons go unused. Indeed, that’s how Groupon makes a fair bit of its money. But that doesn’t help merchants or consumers—a big pain point that CoupFlip is trying to alleviate.
CoupFlip has garnered lots of media interest, especially for a startup that was founded last year and just released its product today. The company is led by CEO and co-founder Phil McDonnell, a former Google search engineer from the Seattle area. He is joined by co-founders Fred Schwarz and Mike Cwalinski. Having all just graduated from Dartmouth College’s Tuck School of Business, Schwarz and Cwalinski are setting up shop in Boston this summer, while McDonnell is moving to San Francisco. (That arrangement will be interesting to watch.)
The CoupFlip concept is different from daily deal aggregators like DealGator and Yipit. The point is “to create liquidity in the market,” says McDonnell, and, more importantly, “to give people offers on the spot.”
But if the idea of a daily deals marketplace sounds familiar, you might have heard of a startup called CityPockets, originally founded in New York. That company, which set out to help consumers manage daily deals and sell unused ones, has relaunched under the name Reclip.it and will be shutting down the CityPockets service at the end of June, according to co-founder and CEO Cheryl Yeoh. She says the founders discovered that the population of coupon clippers is larger than the population of daily-deals users; Reclip.it is a Pinterest-like platform where coupon bloggers and other shoppers can share the deals they’ve discovered. (The next generation of digital coupons looks to be one part Pinterest, one part Groupon, and one part Craigslist.)
So what does the birth of CoupFlip say about the broader daily deals industry? And conversely, what is the startup’s real opportunity in what seems like a saturated market for deals?
For the core deals that the top sites like Groupon and LivingSocial offer, the market has peaked, McDonnell says. But there’s plenty of opportunity in other product areas, such as travel and physical goods, he says. And it seems nobody has yet mastered the variable of timing in any of these types of deals. Meanwhile, Google sees itself as a deal aggregator, he says (remember its $6 billion offer for Groupon?), and will do fine as long as it gets access to the top deal sites. So it sounds like the industry has stabilized, and it’s a reasonable time to dive in as a startup. “Groupon isn’t going to disappear tomorrow,” he says. “They have a lot of revenue.”
Not surprisingly, McDonnell and his chums see a multibillion-dollar opportunity in reselling digital coupons and deals, and they want to grab a slice of it. Just look at StubHub in event tickets and Cardpool in gift cards, for instance. “It’s very profitable if you figure out how to do it efficiently,” he says. At the same time, he adds, “it’s not a market that’s standing still.”
For now, CoupFlip’s plan is to get humming in Boston and show its ability to expand. The four-person company previously raised money from billionaire Ulrich Otto. McDonnell says the startup probably will look to raise more money later this year.