Online discounting sites 'a small niche' in 2012, says Deloitte

Bad news for Groupon – the online discount industry which surged in 2011 will
become just “a small niche” this year, according to Deloitte.

In its annual report on the technology, media and telecoms sector, the
consultancy firm has predicted that “hundreds” of online coupon
businesses will fail in 2012, whilst those that survive will have to operate
on much slimmer margins.

“They may need to accept lower commissions on sales of coupons to entice
retailers to consider using their services, as well as shifting their focus
from discount size to value, utility or even rarity to change the perception
of what they have to offer,” it said.

Groupon, the most high profile group discount merchant, has been caught up in
a string of conflicts with small businesses who used Groupon to offload
excess stock, but ended up overstretching themselves and nearly facing ruin.

However, the listed company is not the only technology stock whose fortunes
are likely to take a turn for the worse this year, according to the report.

Revenue growth for social gaming is likely to slow to less than 20pc in 2012,
forcing companies like Farmville-maker Zynga to shift their focus from
selling virtual goods to a more traditional advertising model.

“The overall community of social gamers has stuttered over the past two
years. It [social gaming] needs to adopt the business model of the more
traditional console gaming industry and look to develop franchises,”
the report said.

By contrast, television audiences are expected to relinquish their viewing
habits more slowly than anticipated. Video-on-demand services may be gaining
traction and connected televisions were the highlight of the Consumer
Electronics Show in Las Vegas earlier this month – but in 2012 around 95pc
of all TV programmes will be watched live or within a day of broadcast,
Deloitte said.

In telecoms, smartphones are expected to proliferate, with the number of
cheaper handsets retailing for under $100 (£65) is expected to top 500m.

“They will have weaker processors, less memory, slower connectivity
options, lower resolution cameras but purchasers will be happy to trade
off lower specifications for lower price,” Deloitte said.

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