5 Reasons Daily Deals Are Tanking--and 3 Reasons They're N
Source: Robert Hof
Just in time for Groupon’s initial public offering of stock, it looks like the daily-deals business is already on the decline. Last Friday, Experian Hitwise reported that Web-based traffic to “daily deal and aggregator sites” is down 25% this summer. Groupon’s traffic plunged 50%. Daily-deal tracker Yipit also reported that deals revenues overall were down 7% in July from June.
Now big-name companies are actually dropping their daily deals. Last week, Facebook said it’s ending its deals service. (They’re still showing up in my inbox even as recently as this morning, however.) And today, Yelp scaled back its deals.
What’s going on? Mainly a serious case of bubble thinking, as entrepreneurs and venture capitalists pile onto the latest hot trend and then discover the market isn’t as boundless as they hoped. But more specifically, the deals business is suffering from a number of challenges:
* Inbox overload. Some 52% of people in a June survey by Experian’s PriceGrabber said they’re overwhelmed by the sheer volume of deal offers. I get deal offers from seven or eight services, even from a couple that I swear I didn’t sign up for.
* Lame, repetitive offers. Seriously, I’m never going to a spa, no matter how many or how big the discounts.
* Merchants can’t take anymore. Lots of them have been complaining that whenever they offer a deal, other services come out of the woodwork and pitch them incessantly. Others think they’re no good for their businesses in the first place, since they condition customers to expect profit-killing discounts. Most of the deals I’ve taken are for businesses I already frequent and probably still would, deal or no deal.
* They’re not as easy to do as they look. Facebook’s deals, which were mostly focused in San Francisco and only occasionally in Silicon Valley where I live (and where Facebook is headquartered), were largely useless to me. And how many people, really, are going to do things like flying lessons? Maybe if the flying-lesson company gets a few takers, it’s worthwhile for them, but for the vast majority of people, offers like this are the worst thing in their email box besides spam.
* Too many of the companies doing them have no particular expertise or the brand breadth to offer them credibly. Really, why would I expect Facebook to offer daily deals? It’s a social network, not an e-commerce site. And daily deals aren’t nearly as social as Groupon’s name implies.
Still, daily deals aren’t dead yet. Here’s why:
* They’re deals! People will always love deals. And despite complaints of too many cold calls from deal services, clearly a lot of merchants like them.
* Other well-funded companies are still jumping in. Amazon.com, for instance, which has been offering many kinds of retail deals on its site for years, recently started local deals. For Amazon (an investor in Groupon rival LivingSocial), it’s a natural extension of their brand. And the few that I’ve seen are quite local and pretty good so far. Google, which has been making a broad push on local advertising and marketing, is also testing the waters in a seemingly careful way.
* They’ll evolve. Deals are mostly local, but deals aren’t the only way for local businesses to market�Cand maybe not even the best way beyond occasional new-customer-acquisition drives. Groupon is already experimenting with other services such as Groupon Now, a real-time local deals service for mobile devices.
Ultimately, I think daily, instant, local and other kinds of deals we haven’t even seen yet will become just one part of many companies’ arsenal of online marketing and advertising efforts.
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