Daily deals forecast cloudier, but brands not jumping ship

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AT&T Interactive operates its Deal of the Day offers through YellowPages.com
AT&T Interactive operates its Deal of the Day offers through YellowPages.com

The future of the daily deals industry grew cloudier in August, as tech-sector players Facebook and Yelp cut back on their own platforms and experts openly doubted the business model of sector heavyweight Groupon. Yet marketers say they are not yet ready to dismiss daily deals as a fad.


Three months after Groupon announced a $750 million initial public offering (IPO), it reportedly faced numerous inquiries from the US Securities and Exchange Commission (SEC) about its use of accounting metrics. The Chicago-based company, which reportedly considered delaying its IPO, said in SEC filings that it generated $878 million in revenue in the second quarter, but lost $102.7 million. Meanwhile, Facebook and Yelp decided to terminate and drastically scale back their digital coupon initiatives, respectively. However, Facebook will continue to expand its Check-in Deals product, which allows consumers to use Web browsers or smartphones to proactively find nearby deals. 


Although Yelp did not terminate its Deals program, the company cut a 30-person team responsible for selling deals and local ads into a unit half that size focused solely on daily deals. Chantelle Karl, senior PR manager at Yelp, said the company has launched a product for small business owners that lets them upload deals directly to their Yelp listing, but declined to provide additional comment. 


Sucharita Mulpuru, VP and principal analyst at Forrester Research, said the decisions by Facebook and Yelp "point to the lack of profitability in Groupon's model." She speculated Facebook and Yelp struggled because "Facebook was [not] actively trying to source deals" and "Yelp was trying to do some sourcing of deals, but they're fundamentally an advertising model." 


However, marketers are not fleeing from daily deals programs quite yet. Ticketmaster partnered with Groupon last May to launch GrouponLive, a venture that offered local concert deals to mobile devices. Kip Levin, EVP of e-commerce at Ticketmaster, said his company will continue to work with daily deals providers. 


"There's a high number of tickets that go unsold in the industry. We invest in social media to build awareness of these tickets," he said. "The daily deals model resumes our engagement with consumers and it's a model that we'll continue to test and explore." 


AT&T Interactive, which operates deals through YellowPages.com, will also continue to integrate Deal of the Day offers across its products, said Dawn Benton, director of corporate communications at AT&T.


Groupon declined to comment for this story, but Andrew Weinstein, head of communications at LivingSocial, said various analysts and organizations have released a range of contradictory and competing statistics about his company. 


However, "none of these organizations have access and insight into our internal numbers," he said, adding that the company strives to be the "glue between merchants and customers." Weinstein noted that LivingSocial has also launched sites such as Escapes, Adventures, Instant and Families in recent months.

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