Yahoo!7 buys group buying site Spreets for $40m

Yahoo!7 has acquired Australian group buying site Spreets in a deal worth around $40m.

Yahoo!7 boss Rohan Lund said: “The group buying space has been exploding in the last six months. Spreets was the first.”

The site was co founded by Dean McEvoy and Justus Hammer. Although the exact terms of the deal have not been revealed, Mumbrella understands that the payment by Yahoo!7, which beat competition from other potential purchasers, was all up front.  

The deal was signed last night and announced at a press conference this morning.

Spreets was only launched in February last year with revenues of just $4,000 in its first month. This month it will see $4m in revenue and now has 52 staff.

The way that Spreets – and other group buying sites in the competitive space – operate is by working with retailers to offer users a heavily discounted deal. The retailer shares a slice of the revenue with the group buying site.

The best known site globally is Group On which turned down a reported $6bn purchase offer from Google.

McEvoy says that his decision to launch came while he was in the US looking for investors in his restaurant reservation site Booking Angel and saw the fledglign Group On. He said: “I realised that was the silver bullet that local businesses need to get new customers.”

The group buying space is becoming increasingly competitive including the NineMSN-owned Cudo, Jump On It, Living Social, Scoopon and Our Deal. News Ltd has an indirect investment in Our Deal through its part ownership of digital investment company Netus which partly owns the site. ten is also an investor in Our Deal.

Groupon has been unable to launch in Australia because the groupon.com.au domain was bought by Scoopon with a legal battle in the offing. Instead it has launched Star Deals.

Lund said that one attraction for Yahoo!7 was that it was a new type of online revenue stream for the company. He said: “This is a fair price which helps us diversify for display and search.”

McEvoy said that one reason for selling to Yahoo!7 was that the company planned to invest in speeding up the growth of Spreets which is already in Sydney, Melbourne, Brisbane, SAdelaide, Perth, Canberra, Wellington, Christchurch and Auckland.

Comments


  1. CitySlicker
    20 Jan 11
    10:34 am

  2. hahaha – pretty sure they weren’t the first – but i guess theyve gtot a good sales pitch. Many vendors not too chuffed about their experiences with spreets – but good on em!

  3. snowflake
    20 Jan 11
    10:56 am

  4. Wow. Maybe now they’ll finally be able to afford that missing apostrophe in “Todays deal” on their site.

  5. Tim2
    20 Jan 11
    11:18 am

  6. I say bubble.

  7. Fionn
    20 Jan 11
    11:58 am

  8. $40m for a business with massive competition and no huge market place differentiation or barrier to entry seems a lot.

    With Groupon entering the market with nigh on a billion in their pocket, established AU players like JumpOnIt, up and comers like Cudo backed by PBL and a raft of other more specialised sites launching you have to wonder on the financials

  9. reevesy
    20 Jan 11
    12:20 pm

  10. Agree with Fionn – seems like a lot of money for a clone of a clone of c lone. – assuming these guys are still clearing 40-50% o- thats $80M in sales you need to even get close to break even.

    Still i guess if you’re Yahoo – you gotta have one – everyone else has a deals site these days. (wish i had one to sell someone)

  11. Surprised
    20 Jan 11
    1:04 pm

  12. Hopefully now they can actually incorporate a ‘Gift Certificate’ option, so that if you purchase the deal as a gift it doesn’t require you to print out an unattractive email with all the details on it to redeem the offer.

  13. anon
    20 Jan 11
    1:07 pm

  14. This has got to be the silliest deal ever. You can build one of these sites in a week with a half decent team – and building up 500k subscribers wouldn’t take much more than a couple of million (not even) and 6 months. What are they buying for $40 million here?

  15. Tim2
    20 Jan 11
    1:10 pm

  16. Fionn – exactly. Value should be along the lines of Revenue/Margin/Active users-discount for Groupon coming.

    I’d take the cash if I were them however.

  17. Tom
    20 Jan 11
    1:26 pm

  18. Congratulations to the Spreets team!

  19. Ian Lyons
    20 Jan 11
    1:32 pm

  20. I have a sneaking suspicion that the “$40M deal” was transmutated from one of Dean’s quotes “…$40 million in savings”

  21. Anon
    20 Jan 11
    1:35 pm

  22. Who confirmed they were bought for $40 million????

    “The financial terms of the acquisition were not disclosed.”

    Am calling BS on this one!

  23. carrob
    20 Jan 11
    1:51 pm

  24. That’s awesome. There’s some other website that is going to start doing this in Australia.

    I forgot their name.

    Oh. I just remembered.

    It’s called facebook.

    But I doubt that it would be any real threat to Yahoo……..

  25. Alisdair
    20 Jan 11
    2:19 pm

  26. I am skeptical of the whole group buying principle and too the reliability let alone the calculation of the valuation of $40m.

    Can’t help but think of them all as a glorified Shop a Docket!

  27. Ronnie
    20 Jan 11
    2:29 pm

  28. +1 to Fionn’s comment.

    To Ian Lyons and Anon (1:35pm), check out 1:19 in the video. Dean says “it’s priced around 40 million” in response to Tim’s question of “How much was the acquisition for?”.

    LOL @ snowflake, yep, fixing the missing apostrophe would be good!

  29. Nick
    20 Jan 11
    3:04 pm

  30. I have personally run a promotion with Spreet and was very happy with the results!

  31. Matt
    20 Jan 11
    3:10 pm

  32. I say good on them – what Yahoo7 is buying is expertise, and entrepreneurial drive, both of which are in short supply at Y7. The Spreets guys are very good at what they do.

    Jump On It are doing well, but a lot of the other guys in the space have no clue what they’re doing, and are simply pissing money against the wall – there is a limit to the amount of brazilian waxes anyone can have in a month…

    The old Yahoo! has a very chequered history of acquisitions, but this is one that could actually work out IMHO.

    cheers
    m

  33. Nate
    20 Jan 11
    3:11 pm

  34. There are so many of these companies at the moment, the good news for Spreets is they now join 9 & 10, in 6 months the little players will be gone as Groupon will sought them out, good luck Spreets Cudo and Ourdeal, Groupon was offered 6 billion by Google for a reason, you will have to adjust your rates im pretty sure they work off 5 to 10% enjoy your high percentage rates whilst it last.

  35. Frog
    20 Jan 11
    3:23 pm

  36. Serious FOMO for Lund and yahoo

  37. Gav
    20 Jan 11
    3:38 pm

  38. Does $40m represent good value for a business currently turning over $4m in revenue per month – what do you think their profit margins are? Is this turnover and profit likely to grow?

    A growing business, growing market, and the potential for more growth (and cost savings) with Yahoo’s ownership.

    Barriers to entry are really the sales team, the brand, and that new entrants will struggle more to grow a big and responsive DB (how many sites do you want to sign up to?).

    They are a fantastic business, and great to deal with – good on them. Disclosure: Justus is a good enough looking guy to feature in a client testimonial video on our homepage, so yes, they’re a client.

    Totally with Fionn on the niche sites – and something you’re likely to see hitting soon. We already see sites focused on Sydney North shore, Central Coast, Newcastle, Wollongong, Gold Coast etc, and the next step is going to be more demographic targeting (no, I really don’t want any hair removal, thanks!). And to @surprised #6 – try http://www.zoupon.com.au who have exactly that technology

  39. jerrys
    20 Jan 11
    3:38 pm

  40. At this stage its a distribution game. spreets and scoopon and jumponit were doing ok but there was an interesting relationship between their audiences and the undergrowth of onlinereward/survey websites.

    the living social/jumponit deal using facebook to mainstream has left all the others in their wake. cudo has all that PBL property cross advertising to take them mainstream.

    Yahoo7 should be able to make money from spreets using their yahoo and channel 7 distribution.

    The deal sets the price level for groupon to take out scoopon but it will be interesting to see whether groupon can make their google adsense arbitrage work in australia with a bunch of strong mainstream competitors.

  41. James
    20 Jan 11
    4:12 pm

  42. Interesting purchase I have been following the Group Buying websites in Australia quite closely. I am sure that Yahoo has a strategic plan for the website I mean looking at some public traffic data for Spreets they are quite big in the AU space. I am sure Yahoo can leverage its network and sales team to make the site even larger.

  43. Steve
    20 Jan 11
    4:38 pm

  44. Did Today Tonight run a story about a women that saved 000′s of $’s by using group buying websites last night?

  45. Chris
    20 Jan 11
    4:59 pm

  46. Probably a good move of Yahoo’s part. Let’s hope they make a better fist of it than they have with some of the other acquisitions they’ve made.

    http://www.guardian.co.uk/comm.....NTCMP=SRCH

  47. DJ
    20 Jan 11
    5:10 pm

  48. Bubble, I’m not convinced. On-line addiction for deal starved retail addicts, perhaps closer! Why would so many retailers be oh so keen to discount so massively? Because a large percentage of the coupons are never redeemed? But my experience with one of the sites wasn’t the type of e-retail shopping experience I would rave about.

  49. Cambo
    20 Jan 11
    8:59 pm

  50. Let’s see….Yahoo-7 = few million subs

    Build your own Group Buying Potal + ChompOn.com

    4 Dev’s x 30 days = $81,600 to builld

    Yahoo-7 promotion to existing Subs = $ 20,000

    Total spend = around $100,000

    Pay $40M for lack of Marketing Technologists = Priceless

    Good luck Rohan…employ some GOOD people.

  51. anon
    21 Jan 11
    9:01 am

  52. @Steve – I think that was on ACA, but only people who saved through Cudo (e.g. advertorial for Cudo). I’m sure we’ll see many advertorials for Spreets on TT fairly soon.

  53. Julian Time Out
    21 Jan 11
    10:52 am

  54. @Cambo.

    I’ve knocked up a WordPress site that can do most of this except for the vouchers and the payments.

    I would be willing to part with it for $20m.

  55. franksting
    21 Jan 11
    11:29 am

  56. Can’t knock the result. Well done spreets. I think its a bubble too, but hey, if Yahoo! make something out of it, well done to them too.

  57. Stuart
    21 Jan 11
    11:52 am

  58. Maybe Fairfax will buy me2.com.au

  59. Nitsa
    21 Jan 11
    1:20 pm

  60. Well done Spreets I say.

    And for all you naysayers out there, don’t you just wish you were the Spreets co-founders right about now??

    So no, it was not a new idea.
    But they got off their asses and created a big business.
    $40million worth.
    There’s a lot to be said about ‘stop bitching and start doing’…

    And “Anon” – grow some balls and say you you are.

  61. Chris Kettle
    21 Jan 11
    1:42 pm

  62. Congrats Dean & Justus.

    Well said Nitsa…

    Speaking on behalf of Australian entrepreneurs its extremely tough to get any capital in the $1M – $3M range to build a business to this value. To get overseas investment and a successful Australian exit isn’t given to you on a Silver Plate. Lots of hard-work. Job well done. Whatever the price there is sure to be an earn-out and with Channel 9 and Cudo – it’s a logical step for 7.

    Also for the haters who think you can build this in a few weeks – it also takes a competitor instantly out of the market as well as the money you save in learning what works and doesn’t work.

    Facials all round!

  63. Fionn
    21 Jan 11
    2:03 pm

  64. Please don’t get my post wrong, bloody well done to the guys at Spreets, I think it is great they go toff their arse, built something fast and scalable , did it in a way it got through a DD process and got bought.

    I also don’t think you can build it in a few weeks.

    I do however think that you could build it over a few months with less than $40m and the distribution channels open to you if you are Y7.

    Cudo is the only comparable I guess, and they seem to be bigger, and I would wager that the sunk investment to this point would not leave PBL at a $40m loss.

  65. Cambo
    21 Jan 11
    3:41 pm

  66. There are about 500 group buying sites globally as of today so the culling will start pretty soon. I also wonder if they thought about Google’s Groupon clone Google Offers http://goo.gl/FULFX

  67. Fionn
    21 Jan 11
    4:15 pm

  68. That’s got to p*ss you off, spend $40m on a business and the competitor who decimated your last cash cow comes along and launches one.

    I’m still thinking GroupOn should have taken the $6bn offer from Google, I think this is one thing they will diversify into quite nicely

  69. CitySlicker
    21 Jan 11
    4:50 pm

  70. investment of about $40million including media placement value?

  71. Real Yield
    8 Feb 11
    10:10 am

  72. The only thing of any value in the equation is the relationship with vendors which Yahoo will undoubtedly destroy – so is $40M worth it for a business that Yahoo could have re-created if only it had just done a little hard work?