PayPal to join daily deals race in 2012

E-payments provider plans to offer coupons tailored to users' buying habits and location, starting first quarter next year, to win customers back from Groupon and LivingSocial.

eBay subsidiary PayPal will be looking to join the already competitive daily deals market in the first quarter of 2012, with the introduction of coupon tailored to consumers' buying habits and their location at any given time.

According to a report Thursday by news wire Bloomberg, the e-payments provider's entrance will be in partnership with some of the top 200 U.S. merchants, as they target the daily coupon market which is estimated to more than double to almost US$4.2 billion by 2015, according to research firm BIA/Kelsey.

PayPal President Scott Thompson said in the report that the company will be leveraging its knowledge about customers' preferences to do coupons better than existing players such as Groupon and LivingSocial, by pushing targeted offers to users' smartphones as they walk by participating retail outlets. This way, he added, the company can look to make money from its 103 million members and better reach its revenue goal of US$7 billion by 2013.

"The experience is going to be completely different than anyone else's, through and through," Thompson told Bloomberg. "We'll only give you something that we think fits the category of unique and relevant. Everyone else is going to bombard you."

However, PayPal can expect a tough challenge to displace current frontrunners Groupon and LivingSocial, said Peter Sorrentino, senior fund manager at Huntington Asset Advisors, in the report.

According to estimates from Yipit, a Web site that aggregates online offers, both providers had a combined 73 percent market share in October and are offering real-time deals throughout the day, the report noted.

But there are advantages to PayPal's foray into the daily deals market. Sorrentino said: "eBay could definitely use coupons as counterpunch-type of approach to retain customers. If you can get consumers to your site for something that has a pretty broad appeal, then you can capture their wallets before the couponing companies lead them away from you. Once you've got the eyeballs, the clicks will soon follow."