BIA/Kelsey, adviser to companies in the local media industry, today released an update of its U.S. deals forecast, first issued in March. The firm expects U.S. consumer spending on deals (including daily deals, instant deals and flash sales) will grow from$873 millionin 2010 to$4.2 billionin 2015, representing a 36.7 percent compound annual growth rate (CAGR). In March the firm had pegged 2015 deals spending at$3.9 billion, with a 35.1 percent CAGR.

Compared with the earlier forecast, this update indicates only a slight increase overall by 2015. However, revenues for 2011 have been revised upward significantly to$2 billionfrom the$1.2 billionoriginally estimated in March.

"Even as more consumers sign up for deals programs and awareness grows and new markets are entered, we see a ceiling on how many deals consumers will buy, and their overall interest level in deals," saidMark Fratrik, BIA/Kelsey vice president and chief economist. "With that said, a strong foundation has already been created in the promotional ecosystem of this young industry. We believe daily deals reinforce other advertising and that related services, like instant deals and flash sales, will significantly boost income for key players."

Among the factors underlying this revised forecast are:

• A bigger increase in the number of registrants for deals services. Market leaders Groupon and LivingSocial have expanded quickly and many more participants have entered this arena, including vertical sites and local media companies (either in cooperation with Groupon and LivingSocial or through white-label firms).
• Growth in the number of registered users who are "active" (e.g., buying coupons).
• Greater specialization of deals sites (both vertically and by neighborhood), better targeting capabilities and continued marketing of these services will lead to more activity by registered users.
• Increase in the average number of transactions, resulting from more efficient providers of these services and expansion of the types of products and services being offered (e.g., more travel deals).
• Rise in the average price per transaction, owing to general inflation and the attempt by some providers to offer more valued services at higher margins.

Groupon and LivingSocial continue to lead a growing marketplace of 600-plus players, which include destination sites, white-label providers working with local media such as directory companies, newspapers, and radio and television operators; vertical players; mobile/location-based providers; flash sales sites; exchanges; and aggregators.

"It's worth noting that the deals market continues to grow, despite the recent departure of Facebook and others that may not have been well-equipped to invest the time and money necessary to participate in such a crowded market," saidPeter Krasilovsky, vice president and program director, Marketplaces, BIA/Kelsey. "We expect to see local media companies leverage their existing promotional, sales and other local assets to play a significant role in this industry, alongside today's deals leaders Groupon and LivingSocial."