Yelp Cries Uncle On Deal Services

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After a year of trying to get some skin in the daily online deals game, Yelp has decided to reduce its number of employees working on daily deals, and refocus on its core services: online business reviews. It's probably a good call.

While there is clearly a market for online coupons and deals, it's also clear that there are way too many players in the space right now. Facebook has gotten the message, as well, announcing just last week its unplugging its deals services unit for local businesses. It had just launched in April.

Forrester Research Analyst Sucharita Mulpuru has been watching the online daily deals market and acknowledges that there's just not enough business to go around:

"The space is not as large as everyone thought it was... The big players are exiting because the business is not making a dent in their revenue numbers."

To give you an idea just how crowded the field has become, according to Yipit (a research company that tracks this sector), in July alone 38 companies pushing online deals dropped out, while 36 others jumped in. Groupon and LivingSocial continue to dominate in the No. 1 and 2 spots.

Anecdotally speaking, there seems to be a common refrain among local merchants that once you run a onlne special with any of the players, there's an avalanche of solicitations from other deal services to use them next time. 

Clearly this is just the beginning of shaking out a relatively new market.

As for Yelp, I believe that this was inevitable. It was always a head scratcher to me that Yelp would be approaching merchants to run daily specials. These are the same merchants that live and die by Yelp's online reviews. These are the same merchants that have to buy advertising from Yelp and respond to reviews on the Yelp site.

What have been your experiences with Yelp or any other online deals company?

Last updated: Aug 31, 2011




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