Cudo to be culled?

  • Advertising
  • December 1, 2011
  • Cath Winks
Cudo to be culled?

Rumours are rife Cudo is on the brink of closure after just nine months, with some claiming the company has already let most of its staff go.

MediaWorks Siobahn McKenna wouldn't confirm nor deny the closure, but told the Herald the main reason for the 'possible' closure was that the market was more competitive than anticipated. The New Zealand based Cudo is a joint venture between MediaWorks, Microsoft and NineMSN, which also runs Cudo in Australia. Earlier this year it was rumored that Nine Entertainment was looking to sell Australia’s Cudo and more recently that the media company was planning to sell off some of its assets due to rising debt, so the writing was on the wall.

Cudo's general manager Peter Loughlin was coy when asked about the rumours of Cudo's imminent demise here in New Zealand, "I’m not sure, there are always rumours. I have heard that Cudo is closed and that’s just not the case so if that is the rumour then the answer is no."

On the Herald's reporting most of the Cudo staff had already been let go Loughlin says "We only had a small team, less than ten and we made some operational changes early in November. The Herald leading on the front page of the business section is a little out of context. In terms of scale its probably similar to a 4-Square in Oamaru making some changes and didn’t really justify the size and prominence of the article."

"We have made some operational changes and reduced our media exposure but that was always the plan, having grown a database via traditional media so just now have more of an email focus like other deal sites," says Loughlin.

"We have had some great deals but it’s been challenging with lots of new entrants to the market and when that happens merchants and consumers have choice and margin is generally under pressure."

I think we have led by example in the segment in terms of customer service and advertising compliance – we turned a lot of deals away because we weren’t comfortable with the merchant delivering. If you are going to yell about a deal on TV and radio it needs to be squeaky clean. We haven’t been notified of any ASA complaints which is not the case for many other sites so we are pretty happy with that," he says.

On the competition, Loughlin says, "Clearly GrabOne are the market leader and I think they have done a great job, having a big head start really helps. Treatme had a significant number of New Zealander's emails and a trusted relationship via Trademe to start with so I would never underestimate them."

"Whatever the future holds Cudo has a commitment to continue its ongoing customer and merchant support."

Currently market leader GrabOne  has a very comfortable 70 percent market share. Groupon is scrambling to catch up, while TradeMe’s site TreatMe cleans up the dregs with a 12 percent share. The others – LivingSocial, Cudo, Groupy, and a plethora of other ridiculously named websites – are left scrabbling in the dust. Bradley predicted a shakedown earlier in the year, saying the sector was at the tipping point, with too many players and not enough ball.

“People will start shutting down. There’ll be a number one, a number two, and there won’t be anything else. That’s how it’ll play out.”

"The grab-fest mentality desperately needs to evolve. We don’t want to participate in the race to zero that’s going with some of the deal sites on commission rates, so we’re opting out of that part. Only a few players will be able to survive. The model simply doesn’t produce a high enough margin to warrant the time required to get business owners on board and consumers buying."

So what's in the future for the daily deal market? Rice University in the US recently produced some damning research showing that the sites will have to settle for lower shares of revenues compared to their current levels, and that it will be harder and more expensive for them to find good candidates to fill the pipeline of daily deals. The study, which looked at 324 businesses that undertook a daily deal promotion, found that 21.7 percent of customers never redeem the vouchers they’ve paid for; 26.6 percent of businesses lost money and 17.9 percent broke even; very few users returned to purchase at full price; and 19.8 percent of businesses wouldn’t do another promotion. Associate professor of management Utpal Dholakia said the findings uncovered a number of “red flags” around the industry, and were “symptomatic of a structural weakness in the model”.

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