The Deals Banner Ad Bonanza

There’s still questions whether daily deals giants Groupon and Living Social can build profitable businesses off their huge customer bases. One thing that’s clear is there are profits in helping them get those customers.

If it’s seemed like Groupon and Living Social ads are everywhere, that’s because they pretty much are. The companies have engaged in a Web ad arms race over the past six months, data from ComScore shows, with Living Social lately getting more aggressive.

In April, the companies combined for 3.6 billion ad impressions, with 2.4 billion coming via Living Social. That’s a marked increase from nine months ago, when the two showed under 1 billion ads, per ComScore.

That’s a testament to both the vibrancy of the deals space and its biggest challenge, according to Greg Sterling, an analyst with Sterling Market Intelligence.

“They’re spending so much money on acquisition that they’re in the red on an annual basis,” he said.

This is good news for the Web ad industry. Daily deals ads are typically done via ad exchanges and networks. The flood is actually leading to fewer of the teeth-whitening, belly fat and acai berry ads. But it’s a big business challenge for a company like Groupon, which has run over 19 billion ad impressions since last June, according to ComScore. Groupon is now gaining on Netfllix, ranking as the No. 7 Web advertiser.

According to its recent IPO filing, Groupon’s customer acquisition costs are rising quickly, showing 485 percent growth in the first quarter this year compared to the year-ago period.
For Web ad sellers, the extra demand is welcome but unlikely to materially change their businesses. Even at the current rates, Groupon and LivingSocial represent just 1 percent of total Web banners, according to ComScore.

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