Associated & Northcliffe Media, the consumer arm of Daily Mail & General Trust, is preparing to launch a competitor to US-based discount voucher site Groupon.

According to a source familiar with the project, DMGT is currently working on final builds of its "daily deals" platform. DMGT is expected to acquire what's described as "a very small site, a very small player, as part of the process".

Roland Bryan, managing director of digital media at Northcliffe Media, and Kevin Beatty, chief executive of A&N, have interviewed candidates to take charge of the new venture's commercial operation. Interviewees were told that a soft launch has been pencilled in for March.

DMGT's project follows the Telegraph's launch of a daily deals site for London readers last week. By contrast, DMGT's effort is expected to be national in scope, focusing on major urban centres across the country.

One source suggests that A&N sees its Groupon-killer as a way of defending ad revenues: "The suggestion is that the local newspaper industry has watched jobs, property and other classified advertising move to rival pure-play sites on to the web," he said.

"This is an effort to show that some revenue can be saved for the news business."

Groupon, founded in Chicago in 2008, has been expanding rapidly and now claims to be active in 565 cities worldwide. Talks about an acquisition by Google fell through in December, but Groupon already operates in 20 UK cities following its acquisition of the European group buying start-up Citydeals last year. According to data from SharesPost, a marketplace for private stock, Groupon's registered users are heavily skewed towards the 18-34 age range coveted by advertisers. 

The newspaper industry has become increasingly fascinated by Groupon's business model, which relies on large volumes of registered users buying goods that are discounted by 50 per cent or more.

When Groupon runs a promotion, it takes up to half of the sale price as commission. As many as one-quarter of users who purchase coupons never redeem them. Groupon keeps this "unredeemed" cashflow, too.

If Groupon's business model is profitable to an extent that may alienate retailers, it's also costly. "It's essentially a big bricks and mortar business," says one source familiar with DMGT's plans.

"Groupon are hiring sales people hand over fist in the UK."
Axel Springer, which publishes the mass market tabloid Bild, last week acquired 75 per cent of German coupon outfit KaufDa, which claims 11m users in 12,000 German cities and towns. Simultaneously, The New York Times launched Times Limited, after deciding – in the words of ad sales boss Denise Warren – that it possessed "the assets, the consumer reach and the relationships with the advertisers to do this on our own." 

DMGT sees Groupon's expansion as both an opportunity and a threat. It remains unclear whether the project will come under the wing of Associated Newspapers (home of the Daily Mail and Metro) or Northcliffe Media (which publishes over 150 local news sites in the UK). One source suggested: "It will lean more toward Associated, although some people might see more synergy with our local sales teams."

Metro, the free Associated newspaper that distributes around 1.3m copies every morning in 15 urban centres across the UK, may be part of the plan. This is because -- in the words of one source -- group buying sites remain an "urban phenomenon, and you need lots of registered users in cities to make them work."

However, another source describes DMGT's Groupon-killer as "a standalone operation", that will operate separately from the company's existing sites and newspapers.

Opinions are sharply divided about the wisdom of competing with Groupon. "I think it's completely nuts," said one source familiar with the launch plans. "DMGT are very late to the party and don't necessarily have the skills to run a pure-play business like this."

There are fears that Groupon represents an early – and imperfect – effort to build location-based ecommerce business. In the long term, Facebook and Google may become much more formidable competitors for the likes of DMGT in this arena.

One executive close to DMGT anticipates a rapid expansion of location-based ecommerce "within the next three months".

"It will start to happen when you've got a queue of people in a shop, one of whom will get a discount on their smartphone while the others don't. When that happens, we will start to see an explosion of interest."

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