Yahoo!7 buys Spreets for $40m

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update Yahoo!7 has snapped up Australian group buying site Spreets for an amount reported to be a cool $40 million just 12 months after the site launched to provide the local market with similar functionality as multi-billion-dollar US titan Groupon.

In a statement issued this morning, Yahoo!7 chief executive officer Rohan Lund said Spreets — one of a handful of companies backed by local web startup incubator Pollenizer — was the first group buying site in operation in Australia, and had accumulated some 500,000 members over the past year.

The group buying phenomenon sees just one discounted deal featured per day in each of the site’s geographies (typically cities like Sydney and Melbourne). So far, more than 274,000 vouchers have been purchased through the site, according to the statement.

In Australia, Yahoo operates its sites through Yahoo!7, a joint venture between the global company and local television and media group the Seven Network.

“After carefully reviewing the market it was clear that Spreets is a market-leader in what is becoming a highly competitive and fast growing market. The Spreets management team in Dean McEvoy [pictured above, left] and Justus Hammer [above, right] come with strong expertise and experience in the Australian Group Buying market,” said Lund.

“At its core Spreets is about leveraging insights to deliver the best local deals through an online social experience, and this maps perfectly to the Yahoo!7 Local and Social strategies. The acquisition of Spreets means we can bring the best of Yahoo!7 to grow the business even further.” Lund said the deal was worth about $40 million in a press conference on the subject this morning, although the precise financial terms of the deal were not disclosed.

Spreets chief executive Dean McEvoy said the group buying model had rapidly evolved over the past year — delivering cost-effective marketing to small businesses and addressing what he described as “unmet and growing demand” from consumer for online coupon deals. The executive added that Spreets had delivered over $40 million worth of savings to local consumers in Australia and New Zealand over the past year. And, he said, the acquisition would see Spreets grow further.

“We’re proud to be an Australian born company leading the market in this rapidly evolving space,” McEvoy said. “We’re thrilled with the acquisition by Yahoo!7 as we see the huge potential that one of Australia’s leading online media companies, which has huge momentum in the market, will bring to the Spreets business.”

It’s understood that key investors in Spreets were Pollenizer itself, as well as McEvoy and co-founder Hammer. And in June last year, the company announced it had taken $2 million worth of investment from European invetsors Klaus Hommels and Oliver Jung, who at that stage were focusing their efforts on group buying sites around the world. Hommels had previously been an investor in Facebook and Skype.

However, it is understood that the white-labelled group buying platform Dealised which Spreets uses is not part of the Yahoo!7 deal. Dealised has allocated ownership rights for its technology in the Australia and New Zealand jurisdictions to Yahoo!7, but will maintain the rights in all other international markets.

In Australia, Yahoo operates its sites through Yahoo!7, a joint venture between the global company and local television and media group the Seven Network.

Image credit: Yahoo!7/Spreets

6 COMMENTS

  1. interesting last para Renai,

    so if the 40 mill did not buy the platform, then the bundle purchased consists of:.

    – the leadership team / people expertise
    – the revenue stream e.g. client base/ongoing concern
    – the unlocked value from joining Y! (cough)

    i know not much about valuations but great win for the investors for this bundle huh.

    • Well the revenue stream was pretty substantial :)

      However, I would say this is a fantastic deal for investors and the Spreets team more so than for Yahoo!7. From zero to $40m exit in one year is simply amazing, and frankly, the longevity of the group buying model has not yet been proven; Yahoo!7 may not extract as much value in five years etc. This is truly buying at the peak of the hype cycle.

  2. $40m in savings, on 274k vouchers = average of $145 saving per voucher?

    Seems awfully high to me.

    Also, did you confuse the $40m in savings figure with the purchase price, or do you have an alternate source for the acquisition price?

  3. Not a bad price if you look at today’s news about LivingSocial in the US. They’ve generated over $20million in revenue in half a day by successfully selling over 1 million Amazon $20 gift cards and counting. More info can be found at http://techcrunch.com/2011/01/19/livingsocial-hits-a-million-amazon-gift-cards-sold-20-million-in-card-value/. LivingSocial invested $5m in JumpOnIt (www.jumponit.com), one of Spreets main competitors here locally late last year, while Amazon is a major investor in LivingSocial in the US, investing I believe around $175million.

  4. Competing in the group buying business means you have to acquire new visitors and convert them to coupon-purchasers at a higher volume and a lower cost than your competitors. As often happens in AU ecommerce verticals, we now have one player (Cudo) aligned with Ninemsn and one (Spreets) aligned with Yahoo7.

    The portal gets revenue from something other than ad banners and gets to distribute group buying users to its other properties, while the group buying site gets marketing exposure across web, TV and print they couldn’t hope to pay cash for. It makes good sense.

    Whether $40M is too high or too low is unfortunately only something you learn from hindsight in a few year’s time. Yahoo7’s investment in Seek turned out to be a great deal though it looked like a lot of money at the time.

    As usual, News and Fairfax are lagging behind, but those are also potential players in the group buying market via acquisition, investment or platform license. There will be further developments!

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