Yelp CEO: Groupon Model Unsustainable

September 2nd, 2011 • Posted by Spa Kat • Permalink

First there was word that Facebook was eliminating their daily deals program and then this week we heard from Greg Sterling that Yelp plans to chop their deals sales force in half. Anyone else hear the bottom dropping out of this absolutely unsustainable segment?

We've also heard consistently from certain categories of businesses (very popular ones I'm afraid) that daily deals are uneconomic for them, which does raise questions around the sustainability of "50% off" daily deals for these types of businesses. –Jeremy Stoppelman, CEO Yelp, Yelp Web Blog

The economics of Groupon and other Daily Deal clone offers are absolutely out of whack, falling way short of providing long term value for most businesses. They have clearly over promised new customer acquisition generated by the trumped-up lure of deeply discounted coupons. Most businesses just can't recoup the deal's cost in new business generated from the promotions.

Most analysts and observers agree: the current deep discounting so appealing to consumers, with “50 percent margins” to deal vendors, is unsustainable. Many people, including me, also believe that more “balance” and merchant-friendly policies will inevitably come about. Indeed it’s already happening as some deals programs begin to focus more on loyalty than new customer acquisition. –Jeremy Stoppelman, CEO Yelp, Yelp Web Blog

What's the best way to use deals in your marketing mix? Run them yourself with BoomTime Deals, they produce more long term clients by selling intelligently discounted deals to a targeted demographic.

1 Response...

  1. Perry says:

    I agree. For retail or spa, this is kill the business and it's incompatible with brand strategy.


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