Daily Deals Are Not Dead

In last week’s top story on Mashable, Ben Parr cited Facebook and Yelp’s bowing out of the deals business along with Groupon’s growing instability as reasons to ponder “Are We Approaching The End of The Daily Deals Era?” No. We’re approaching the end of Act 1—the story will continue to develop.

Don’t let the media noise drown out the core appeal of local deals: that, for the first time, the Internet, social media, email and mobile now have a successful, measureable method by which to drive millions of people online to do something offline. To get out from in front of their computers and experience their local community.  Deal programs are the first product to truly make that magical marriage of advertising and consumption work.

But, the conflict in Act 1 is that the primary pioneers of the product created an unsustainably expensive infrastructure to deliver it.  They tried to build new, enormous consumer brands just around deals; they spent too much on Super Bowl ads and sales forces to sell only one kind of marketing program. The “Groupon tax” is too high.

While the wheels may be coming off the glitzy expensive consumer branding hype of Deals 1.0, merchant and consumer value is driving the development of Deals 2.0. The focus in this phase will not be on deal sites and daily emails, it will be on matching the right customer with the right offer at the right time wherever they are on the internet or mobile device.  You will not go to a consumer deal destination, but offers will be contextualized across your connected experience everywhere.

Parr’s primary sign of decline is the killing off of daily deal programs by big players like Facebook. Yes, the social network is ending Facebook Deals trial program. While sensationalist would like to read deep meaning into this, sometimes a trial is just that: a trial with a beginning and an end. Facebook also emphasizes that it “remains committed to building products to help local businesses connect with people, like … Check-in Deals.”

While focusing on Facebook, Parr neglects to mention those expanding their deal programs. Amazon.com, for instance, recently launched its local deals program, and even expanded into more markets a week before Facebook’s announcement. And Google continues to grow its Offers program, while FourSquare just launched its own spin on daily deals, obviously with a strong advantage in the mobile space.  On our own PoweredByTippr daily deal platform, we are launching 3-5 new deal sites a week for publishers entering the business with more sustainable models.

While all the pundits pontificate on the impending doom of the daily deal industry and the big players spend themselves into oblivion trying to build a life raft, some of the smaller guys are floating along just fine and are even (gasp) profitable. How? They start with high-affinity, loyal audiences that they built based on quality, focused content rather than bought with $180 million marketing dollars, and they send them killer deals that align with the subscribers’ interests.

Take 225BestEats.com. Masterminded by Louisiana media mogul Rolfe McCollister, 225BestEats was born out of a popular local publication in Baton Rouge, 225 Magazine. Having built a solid audience around quality content covering local news, culture, and food, Rolfe recognized the potential of the magazine’s website, 225BatonRouge.com, as a blockbuster deals program.

So, with strong advertiser relationships already established particularly in the local food scene, Rolfe zeroed in on restaurant offers, signed with a deal software provider, and launched 225BestEats.com. Running just one to two killer offers per week from iconic local restaurants, 225BestEats has seen subscriptions triple in a single year, and beats Groupon in voucher sales and revenue in the Baton Rouge market on a regular basis.

Similar to 225 is EatAroundOKC.com. An insightful and well-crafted commentary on the OKC cuisine scene, EOKC and local deals were a natural fit. So, in October 2010, founder Tim Wall found a white-label technology partner, signed up local restaurants for features, and EatAroundOKC Deals was selling offers at a profit by December. Within the first month, subscribers were up 250% and EOKC had opened an entirely new revenue stream.

Both sites are in smaller markets, run by smaller teams, have smaller subscriber numbers and have no previous experience in the group buying space. Recipe for daily deal disaster, right? Wrong.

What 225BestEats and EatAroundOKC have that the Groupons and LivingSocials don’t are a high-affinity audience that comes for the targeted content and, subsequently, loyal merchant advertisers that come for the targeted audience. High-affinity audiences mean paying subscribers for deal sites, quality customers for merchants, and a sustainable model for everyone.

As the curtain is falling on Daily Deals: Act I, bid farewell to the original actors of horizontal, deal-only sites and poorly-targeted daily emails, and clear the stage for more relevant offers and more focused deal programs providing higher value to merchants and customers. Sure there will be some blood in the transition, but it’s only just getting interesting.