Yelp keeping deals program but foreshadows a downturn
After just four months, Facebook axed its Deals promotions feature. Although this might be seen as a victory for daily deals giants like Groupon and LivingSocial, among others, such a move could be foreshadowing the burst of the daily deal bubble.
Contributing to that possibility is a statement from Yelp, which has a daily deals product of its own. Although Yelp is retaining this program, that doesn't mean it's all "rainbows and unicorns," as Yelp's CEO Jeremy Stoppelman colorfully wrote on his company's official blog this week.
Stoppelman explained what he thinks about the current state of the daily deals market after launching Yelp Deals last year:
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.
This definitely isn't the first time we've heard about daily deals costing vendors plenty of money. It's obvious that consumers aren't too thrilled by the whole daily deals spectrum as well based on a survey from PriceGrabber earlier this summer that found that more than half of U.S. consumers are overwhelmed by all of the emails they receive from these sites on a daily basis.
Yelp is also trimming down its original 30-person team dedicated to selling daily deals and local ads down to a group of 15. (Thankfully, Yelp is quick to point out that no one was fired or laid off but rather just moved to some other project.) This move on Yelp's part also points towards the fact that Yelp (and probably other companies with daily deals on the side) don't see this venture as a viable business like they might have six months to a year ago.
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