eBay (NASDAQ:EBAY) has entered the daily deals market with a new platform called Lifestyle Deals as it comes close to the launch of a new look site and same-day delivery in some markets. The platform is inspired by Groupon‘s (NASDAQ:GRPN) business model and is presently limited to certain metropolitan markets. The current offerings on Lifestyle Deals include the standard daily-deal fare: teeth whitening, yoga classes, half-off dining, etc. Apart from Groupon, the company will also compete with LivingSocial and Google (NASDAQ:GOOG) Offers in the daily deals space. We think this is a big move by eBay, which has traditionally focused on products rather than services. While it has run daily deals on physical products for about two years, this is its first foray into discounted local services in the United States.
“We have a big marketplace and a lot of people who come to eBay don’t just come for one thing-
they stay and buy across categories,” – Devin Wenig, president of eBay Marketplaces
Over the past year, eBay has been experimenting with new categories, free listings and varied payment methods mainly due to increasing competition from Amazon.com. The new platform seems to be an extension of these efforts and is powered by Signpost, which also supplies daily deals for Google Offers. eBay views Signpost as another merchant who may sell local or even global services on eBay over time and it plans to add more deal providers if the pilot effort proves successful.
The daily deals market in the U.S. is estimated to reach $4 billion by 2015, up from $2 billion last year.  Groupon has 53% market share in the U.S. daily deals market, and eBay will have to marshal a large chunk of its resources to mount a serious challenge.  Facebook (NASDAQ:FB) had pulled out of a similar initiative after a four-month test some time back.
Taking into account eBay’s experience in running daily deals for physical products and that it is using an experienced deal provider, Signpost, to supply daily deals instead of assembling a sales force similar to Groupon’s, we think the company may be able to expand the daily deals business and challenge Groupon’s dominance.
The diversification will also help Ebay create an alternative to its auction business, which is under threat from the Supreme Court’s pending decision on the Kirtsaeng vs. John Wiley and Sons case.  If the Supreme Court upholds the decision of the lower courts, transaction volumes on eBay’s Marketplace could see a steep drop, resulting in a loss of substantial revenues for the company.
We currently have a $50 Trefis price estimate for eBay, which is at a 5% premium to the market price.
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