Cheap thrills: Chicago long a hotbed for online coupons, discount deals
CHICAGO - Forget "Chicagoland." This is "Couponland."
Chicago is quickly becoming a U.S. hub for online coupon and deal companies, and the trend started long before wildly successful Groupon was even conceived. Today, the Chicago region is headquarters for dozens of coupon and deal websites.
Sites include some of America's biggest, such as Groupon.com and CouponCabin.com. They include some of the oldest, such as FatWallet.com, circa 1999, and MrRebates.com, 2002. They include newbies started this year by a single person and another launched this year by one of the largest coupon companies in the world.
"Chicago is the cradle of civilization for the daily-deal industry," said Dan Hess, chief executive of Local Offer Network and Chicago-based deal aggregator Dealradar.com. "It gained an early lead and continues to lead the pack."
Among daily-deal group-buying sites, similar to Groupon, Chicago is the No. 1 city, with 43 such headquarters. That beats New York and San Francisco, according to Dealradar.com.
Why is Chicago so popular with online coupons sites? Explanations range from a deepening pool of technology workers to a plethora of academic institutions to an entrepreneurial spirit fostered by public and private programs that invest in startups, company officials say.
Illinois, and Chicago in particular, is unique when it comes to technology and innovation, said Ed Longanecker, regional vice president for technology trade and advocacy group TechAmerica. "I have not seen, other than maybe in California, such a concentration of entrepreneurial-focused organizations and more emphasis and passion for growing the technology industry in a state," he said. "There is simply a stronger desire and more potential to be a center for innovation in Illinois."
Brad Wilson of BradsDeals.com has a less measurable, but perhaps no less accurate, explanation for the proliferation of coupon sites in Chicago.
"We apply the old-fashioned, salt-of-the-earth Midwestern values to startups and the Internet," Wilson said. "There is a deep-rooted practicality in Chicago and the Midwest. Our startups solve real problems, like helping people save money or be more frugal."
Indeed, part of the reason for the proliferation recently is the sour national economy and consumers' changing attitude toward using coupons.
"People aren't leaving the house now without a coupon," said Todd Winer, a principal with AnotherDailyDeal.com, which started in September and is based in Vernon Hills, Ill., near Chicago. "It doesn't have the stigma anymore. The whole mindset about using coupons has changed."
Among the newest entrants to Chicago is CouponNetwork.com, which opened offices in a downtown high-rise in recent weeks. It's no startup on a shoestring budget. It's backed by one of the largest coupon companies, Catalina Marketing. That's the 28-year-old company behind the customized coupons printed at some 50,000 supermarket and drugstore checkout registers nationwide. Avid couponers refer to the coupons printed along with register receipts as "Catalinas."
Catalina has been a behind-the-scenes company, while CouponNetwork.com is its first foray into dealing directly with consumers. It aims to focus on printable coupons in product categories that don't have many coupons, such as baby, pet, organic and gluten-free items, officials said.
Why locate CouponNetwork.com in Chicago instead of Catalina's home of St. Petersburg, Fla.?
"It simply comes down to talent," said Chris Henger, executive vice president of CouponNetwork.com. "A deeper, broader pool for both technology and digital talent exists in Chicago. In addition, Chicago is proving to be a hot spot for couponing - Groupon, CouponCabin and now CouponNetwork."
FatWallet.com, of Rockton, Ill., is among the pioneers in online deals, starting in 1999. It could operate anywhere in the country, but, as spokesman Brent Shelton said, "this is home."
"We're big Chicago sports supporters, and although a little more rural than some other Chicago coupon sites, it's close enough to attract talent, be part of the third-largest media hub, experience urban culture and get on a plane in an hour," he said.
With its 52 employees, FatWallet is considered among the more serious coupon sites that fall under the heading of "performance marketing," meaning they get paid a commission if they persuade a customer to buy something.
How big is performance marketing in Illinois? The state is home to 9,000 performance-marketing businesses earning $610 million, according to the Performance Marketing Association.
Most sites are single-person operations, including hobby bloggers who post ads in hopes of making a few bucks. But Illinois has the most performance-marketing employers, which means they have multiple employees, of any state in the nation, said Rebecca Madigan, executive director of the association. Illinois has nine such employers, while the nation's most-populous state, California, has just three.
While Chicago is home to long-standing coupon sites, it's hard to ignore the Groupon effect. Most of the newest businesses are daily-deal sites, inspired by Groupon's success of selling consumers deal coupons to local businesses, usually service businesses such as spas, restaurants and entertainment venues.
They are admitted copycats - planets now orbiting the Groupon star - although some tweak the Groupon model, offering skimpier discounts than Groupon, for example.
Traditional media in Chicago are participating in the daily-deal mania too, with the help of partners. The Chicago Tribune Media Group, for example, through ChicagoShopping.com, offers a deal of the day via Groupon. Later this month, the group plans to offer an additional daily deal of its own by partnering with Local Offer Network, the company said. Sun-Times Media offers a daily deal via Canadian firm Wantsa.
Former commodities trader Jordan Heller started WeDeal.com in April. Though less than a year old, it is among the older group-buying sites in a young market. The company started in Northbrook and has since moved to Highland Park.
He said Groupon was definitely an influence. In fact, he basically started a Groupon clone for the north suburbs at a time when Groupon was concentrating on deals in the city, he said.
"Certainly Groupon being headquartered here gave Chicagoans a head start with the concept," he said. But the region is home to a lot of startups and fosters entrepreneurship, he said. "It's a good spot to start a coupon business."
Heller said growth in Chicago-based deal sites like his is unlikely to wane anytime soon. "As crowded as this space is, there's room for growth and success," he said. "Everyone's looking for a deal these days."
Still, a shakeout already has begun, Hess said. Many sites will be acquired, go out of business or simply go dormant, as the same deal stays on a site for weeks.
"However, at this stage, the growth continues to outstrip the shakeout," he said.
Hess' Dealradar.com currently monitors 230 daily-deal sites, and 180 are active on any given day, he said. "Without exaggeration, every single day we hear from at least one person who has started or plans to start a deal site."
The best bet is that Groupon will be among the long-term survivors, said Dan de Grandpre, editor-in-chief and chief executive of DealNews.com.
"Twelve years ago, venture capitalists threw billions into online auctions, and now we have eBay. Venture capitalists threw billions into online department stores, and now we have Amazon," he said. "In 12 years, I'm positive that Groupon will still be here. I can't say that about its competitors yet."
TOP U.S. DAILY-DEAL SITES:
Top 10 U.S. deal sites, based on number of markets served in average day.
- Groupon
- LivingSocial
- Daily Dealster
- Eversave
- SocialBuy
- KGBdeals
- Angie's List
- BuyWithMe
- HomeRun
- Tippr
SOURCE: Dealradar.com/Local Offer Network
COUPONLAND
Top 10 U.S. cities based on number of active deal sites, January 2011:
- Chicago: 43
- New York: 37
- San Francisco: 33
- Los Angeles: 31
- San Diego: 31
- Atlanta: 25
- Boston: 24
- Washington: 22
- Philadelphia: 21
- Austin, Texas: 20
- Denver: 20
SOURCE: Dealradar.com/Local Offer Network
DAILY DEAL SITES:
Sampling of coupon and deal sites headquartered in the Chicago region.
- Groupon.com
- Dealradar.com
- Bunchbite.com
- WeDeal.com
- YouSwoop.com
- ImIn.com
- FlyCoupon.com
- AnotherDailyDeal.com
- TwoBuckDuck.com
- BareDeal.com
- PriceBunch.com
- DailyDeals.net
- Paylessnow.com
ONLINE/OFFLINE COUPONS, DEALS & REBATES
- CouponCabin.com
- Fatwallet.com
- BradsDeals.com
- MrRebates.com
- CouponNetwork.com
- Restaurant.com
- RewardsNetwork.com
- CoolSavings.com
- ShopLocal.com
SOURCE: Chicago Tribune research
(c) 2011, Chicago Tribune.
Distributed by McClatchy-Tribune Information Services.