Kgbdeals and Mobile Spinach Hunt for Opportunities in Troubled Daily Deals Market

10/25/11Follow @jpruth

In spite of companies crumbling in the daily deals space, New York’s kgbdeals and San Mateo, CA’s Mobile Spinach believe they can survive in this now-brutal sector. Kgbdeals, part of directory assistance company kgb, acquired New York’s TheDealist last Wednesday to expand its reach with customers. Before kgbdeals could uncork the champagne, a rival deals site staggered on stage in a financial stupor.

Last Thursday, BuyWithMe in New York and Boston fired about half of its staff, a move which raised questions about the company’s future and the prospects for the daily deals market as a whole.

Patrick Albus, CEO of kgbdeal USA, says his company remains focused on growing in spite of the possible extinction that others in the deals space face. “There is a shakeout of smaller players going by the wayside,” he says. “This industry can’t support as many players as there are out there today.” He says about 200 deals sites have shut down so far this year while others are looking for white knights to ride to the rescue. “We get calls from various deals sites looking for us to acquire them,” Albus says.

John Vitti, co-founder and chief marketing officer of one-year-old Mobile Spinach, says some startups in the daily deals sector tried to chase the money by copying early players such as Groupon. Mobile Spinach offers a type of mobile currency that companies such as Foursquare can offer to their users for offers with local merchants. Mobile Spinach raised $1 million in a funding round led by Blumberg Capital in January. Vitti believes his company’s angle on deals, which it thus far does not use a sales staff to promote, will help it survive where others have withered. “A lot of people are going after a cookie-cutter approach,” he says. “[They] get sales reps, hit up merchants, and slap up a website.”

Vitti says it’s hard to break into the market with that worn-out strategy these days. “You’re doomed to fail if you keep repeating that model,” he says. But daily deals can endure, he says, if the surviving players bring dynamic ideas to the table. Though there have been questions about … Next Page »

João-Pierre S. Ruth is the editor of Xconomy New York. He can be reached at jpruth@xconomy.com and followed on Twitter @jpruth. Follow @jpruth

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