The shine appears to be fading on the daily-deals marketing model.
On the heels of Facebook's announcement last week that it would abandon its Facebook Deals, which offered discounted coupons for local businesses, Yelp announced today it is trimming the number of employees working on its Deals product. Jeremy Stoppelman, Yelp's chief executive officer and co-founder, wrote in a blog post that while daily deals have been a hit for certain types of businesses, the model is struggling to deal with issues raised by both consumers and participating businesses:
The space faces some real challenges... while consumers love it when you can offer them a great deal nearby, they're not so stoked when you email them a restaurant deal for a place in Berkeley, CA when they live across the Bay in San Francisco. We've also heard consistently from certain categories of businesses (very popular ones I'm afraid) that daily deals are uneconomic for them, which does raise questions around the sustainability of "50% off" daily deals for these types of businesses.
As a result, Stoppelman said the local business reviews site would halve the number of sales people working on daily deals. The 30-person team that was formerly focused on selling daily deals and local ads now consists of 15 people focused only on daily deals, he said. Stoppelman said Yelp wasn't killing deals and trumpeted a new way for business to post deals to their pages.
Yelp's concession seems to bolster the strength of sector leader Groupon. However, Groupon continues to rack up a string of net losses, reporting a second-quarter deficit of more than $100 million earlier this month in a Securities and Exchange filing. While much that is attributable to the company's rapid expansion, marketing strategist Rocky Agrawal told financial news site Minyanville that "merchant fatigue and customer fatigue" may also be to blame.