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Daily Deal Margins - Not the Model - Under Scrutiny

First Facebook pulled its Daily Deal offering and then Yelp announced it was scaling back its sales force by redeploying then. "We did take a 30 person team that was selling daily deals and local ads and made it a 15 person team focused solely on daily deals," writes Yelp CEO Jeremy Stoppelman.

The End of Daily Deals?

These events, along with new statistics in the space’s performance have prodded talk of the daily deal market possibly starting to wind down, or at least shift into a more mature pace of growth. Most likely, it is a matter of the latter, not the former.

Experian Hitwise recently reported a significant drop-off in Groupon traffic this summer, nearly 50% since its peak in the second week of June 2011 compared to last week. It also noted that overall visits to a custom category of Daily Deal & Aggregator sites were down 25% for the same time period. Also, it noted PriceGrabber released results from its Local Deals Survey in June, stating that 44% of respondents said they use or search daily deal Websites. "However, 52% expressed feeling overwhelmed by the number of bargain-boasting emails they receive on a daily basis."

Goodbye 50%

For merchants, the immediate conclusion to draw is that the margins are shifting, finally, in their favor - especially as more and more daily deal sites come to market. Search Engine Land noted the same in new post discussing events. "The current deep discounting so appealing to consumers, with '50 percent margins' to deal vendors, is unsustainable," it said."Many people, including me, also believe that more “balance” and merchant-friendly policies will inevitably come about."

"Make no mistake, the model as a whole isn’t going away. But we will see increasing consolidation as well as many failures in the next 12 months. Beyond the familiar names (e.g., Groupon, LivingSocial), winners and losers will start to emerge."


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