Groupocalypse Now
The "Daily Deal" craze has officially jumped the shark. That's wonderful news for small businesses.
Why now? First, Facebook is killing off its Facebook Deals operation. You know, the one that was heralded as a "Groupon killer" when it debuted last spring. At the same time, Yelp is dramatically scaling back its own daily-deal operations.
And according to a Bloomberg report, the number of daily-deal sites that closed in July outnumbered the number of new sites working the market. That's a first, and it reflects a market that is absolutely packed with faceless, pointless, utterly doomed look-alike brands. The overhwelming majority of them won't be missed.
There are two companies, however, that dominate the daily-deal market: Groupon and Living Social. While Living Social appears to be enjoying solid growth, Groupon's Web traffic numbers tell a different story. According to one estimate, Groupon's traffic has dropped by half since hitting its peak in June.
What's more surprising is that Living Social hasn't yet fallen off the same cliff. This is a market where the barriers to entry are absurdly low and where rapid growth -- Groupon's chief weapon against its competition -- is absurdly expensive.
The blogosphere smells blood, and it's piling on. Mashable asks whether we're "approaching the end of the daily deals era." Time.com thinks daily deals are "losing their allure" for both consumers and businesses.
Is the daily-deal industry really collapsing? I certainly hope so.
The problem is that too many businesses were jumping into hopelessly one-sided relationships with companies like Groupon. That includes revenue-split agreements of up to 50 percent, as well as pressure to run deals with the greatest possible discounts and the longest possible periods for customers to redeem the deal.
The result: a race to the bottom that benefits the daily-deal site and (sometimes) consumers, but frequently turns out to be a financial nightmare for small businesses.
The daily-deal business model definitely is not going away. Nor should it. When businesses negotiate wisely and understand as marketing tools, they have real value.
But that value is most potent when it's applied in small, very discrete doses. That's why the current state of the daily-deal industry -- driven by hype, hysteria, wild promises and outrageous expectations -- is so deplorable.
So let the Groupocaplyse begin. Let's shake out the market, dispel the hype, and start again with more realistic expectations about what daily deal offers can -- and cannot -- do.
