Followup: Daily Deals in Danger Altogether?

Since it was revealed last month that Groupon was bleeding money, other big names offering daily deals also scrutinized the deep-discount model and found it wanting. Deals experimenters such as Facebook and Yelp owned up to the fact that the repetitive “super-deal” package isn’t viable for the long term, so they’re adjusting their approaches:

  • Yelp scaled back its daily deals program, even to the point of reassigning half of the salesforce dedicated to those offerings. While Yelp cited feedback from critical business categories as the driver, a loss of revenue due to increased competition also might have been a factor.
  • Facebook dropped the Facebook Deals experiment altogether. Their attempt to compete with Groupon was referred to as a “test” in the announcement, possibly indicating a desire to downplay the fact that they ever tried in the first place.

It’s interesting to note that neither Yelp nor Facebook has dropped the check-in version of their deals. Those types of deals focus more on repeat customers and engendering loyalty, and they also offer more flexibility for the vendor on constructing a customized bargain that will both reward repeat clients and allow for preservation of profit margins. That may be the direction businesses other than Groupon and LivingSocial pursue to try to gain an edge in the deals arena.

Of course, as always, Google is going its own way. Even as others are finding their daily deal models unsustainable, the search giant ramped up promotion of Google Offers, even featuring it on the Google homepage on August 31st. It’s also been made clear that Google is still expanding Offers to cities across the United States, with no signs of slowing.  There’s discussion that Google may be using the current version of Offers merely as a foundation for a much broader program that reaches consumers through multiple channels.  We’ll have to keep our eyes on that prospect and on whether this daily deals shake-up permanently changes business models or eliminates some competitors from the game.

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