Change Is Already Coming to Deals Space
ADOTAS – I checked into Facebook Places exactly one time, and that was to get one of their Deals soon after the service appeared. This hipster badly needed some new skinny jeans, and a check-in at H&M got me a 30% discount. I’m wearing those same jeans right now, and damn, are they tight.
But I haven’t used either since, and I wasn’t surprised when Facebook quietly killed its Deals service following its announcement about dropping Places. At Adotas, we didn’t have a whole lotta faith in Facebook Places since it was launched — while scale was its big advantage against startups like Foursquare and Gowalla, Places seemed liked it jumped into the space too late.
While Foursquare in particular keeps expanding its member base, the excitement over checking in has simmered — by the time Places was launched, the established players had garnered the loyalty of the heaviest check-in fanatics. Turned out the number of people interested in playing the location game was limited.
One thing I liked about Facebook places was that it gave me a slew of options for Places to check into whenever I loaded it on my mobile — and if a little icon was next to the listing, that meant Deal. So if I was just strolling around Manhattan, consumerism’s breeding ground, I’d load up Places in an area loaded with retail shops and see if anybody wanted to offer me a discount.
Nothing ever came up.
And then there was the re-imagining of Deals as a group-buying service in April, with Facebook elbowing its way in-between LivingSocial and Groupon. (The check-in deals became a free service for merchants.) Despite the big hubbub at the launch, the small amount of merchant offerings (even with aggregated deals from ReachLocal and Glit City) overshadowed the most interesting part of the service — Facebook users could pay with Credits.
Four months later, Facebook has admitted defeat in the area. ”We think there is a lot of power in a social approach to driving people into local businesses,” the company said in a statement. “We’ve learned a lot from our test and we’ll continue to evaluate how to best serve local businesses.”
Don’t cry for Facebook and its lost revenue stream; is still raking it in hand over fist courtesy of its targeted display solution — it’s like the social network will take the lion’s share of display revenue in 2011.
But Facebook’s not the only one pulling out of the deal game – According to AdAge, 38 daily deal sites shut down in July (however, 36 more opened). After a significant decline in number of deals and deal revenue, Yelp halved its deal staff, saying it wanted to focus on higher-quality deals.
Google, which only launched Offers back in June (after a ridiculously soft launch in April), is still in it to win it, even advertising the discount service on its much-visited homepage today. Apparently it’s been quite effective.
But all the other news in the space suggests the daily deal game has hit terminal velocity. It almost feels as if the world is waiting on Groupon’s IPO as a bellwether for the future of daily deals; so far the news has not been promising.
However, I’m with Jay Weintraub in believing the daily deal space isn’t going to die — it is going to be transformed. My money is on white-label discount platforms like Group Commerce and Tippr, which offer technology and services for enabling group-buying at the local publisher level through white-label platforms. In particular, such platforms seem to offer a better proposition for smaller and local businesses in terms of targeting.
Gavin, I agree with you that the hype around Daily Deals is ending. And after seeing so much excitement (and crazy potential valuations!) for this business model, it is logical that it is now reaching the extreme opposite.
To me, the daily deals sector is here to stay. Of course, it will continue to evolve, as very few merchants can be successful giving 75% of their revenue away for non-targeted sales and customers.
Personally, I believe two types of models will flourish:
First, deals aggregators, like Yipit: they offer convenience, a one-stop shopping experience, and some level of personalization. Especially as customers have very limited (read ‘no’) loyalty to the deal platform: all they want is a deal!
Second, sites that can offer targeting capabilities to consumers, so they can receive relevant offers, and to merchants, so they can decide who will get the deal and who will not.
At http://www.offermatic.com, we propose such a service: Consumers connect their credit or debit cards with to receive highly targeted offers based on their actual spending history. Customers then shop as they normally would, in any store offline or online. Since the offers and savings are loaded directly to their card, there are no coupons or vouchers to deal with.
This allows merchants to precisely target customers: an acquisition offer for instance will only be sent to new customers!
Terminal Velocity is an understatement. In the time it took me to type these comments, changes happened….it is amazing. The advertising industry is changing faster than superman changed into his tights.
No love for ChompOn Gavin? :)
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Another great option if you’re looking to run your own daily deal is http://www.Buckaroo.com There are no hidden fees or confusing contracts and you keep 100% of your revenue because customers pay you directly.