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The Daily Deals space has grown rapidly since Groupon became popular a little over a year ago. Competitors have popped up nationally and locally to compete for small business deals in all major metropolitan areas of the country. Nationally, LivingSocial and EverSave have tried to duplicate the success of Groupon and done so successfully. The barriers to entry being so low has allowed the great competition to flourish. But the first mover and the one able to scale most rapidly will probably win out, and the Groupon initial public offering (IPO) of stock allows them to scale quickly.

Consolidation is the next key stage of the business model and the IPO also provides money to Groupon to purchase smaller competitors that might focus on unique niches or have unique technologies that would enhance the Groupon business model. One area of consolidation and partnership is the location based service and the daily deals offering. Sites like Foursquare can combine their location information with Groupon’s local deals to improve overall return on investment for advertisers and Groupon itself.

Loyalty has been a concern for the daily deals space with many customers taking the one time purchase and looking for the next great deal instead of purchasing additional products or services. And aggregation sites present opportunity but also increase the competition between the different businesses. Amazon has recently introduced an aggregation service called Amazon Local offering in addition to PriceGrabber’s Local Deals aggregation.