Yelp hasn’t scaled back from the deals space, but rather shifted its focus, according to the firm’s director of European operations, David Scheine. The local recommendations service appeared to reduce its deal presence last year just months after launching it, but Scheine tells StrategyeEye that the firm now focuses on what it calls ‘standing deals’, which appear on a company’s Yelp business page. He claims that the move has proved more successful for the firm, with the deals positioned close to the point of purchase, enhancing the potential to redeem an offer. Yelp’s move coincided with Facebook’s decision to withdraw from deals just months after entering the space, though it has also returned in a different guise since, in the form of Facebook Offers. The wider deals space came in for a wave of criticism towards the end of 2011 after a period of initial hype,
“It wasn’t that we scaled back; it’s more that we have been shifting the focus of our deal efforts,” says Scheine. “We are seeing a lot more of what we call standing deals, which are embedded within search and appear on the individual business profile pages on Yelp. That’s where we have been seeing a lot more traction because it’s really relevant to the consumer, because it is when they are looking to make that purchase, whether it is a haircut or looking for a plumber.”
Yelp CEO, Jeremy Stoppelman, offered his reasoning for Yelp’s change of deal strategy last year, with the standalone deals section seemingly not targeted enough for users. “Of course, as with the birth of any new industry, it hasn't been all rainbows and unicorns," he said. "The space faces some real challenges. While consumers love it when you can offer them a great deal nearby, they're not so stoked when you email them a restaurant deal for a place in Berkeley, California when they live across the Bay in San Francisco.”
Stoppelman’s comments are indicative of one of the struggles facing the daily deals sector, as it faces a backlash after following significant investor and analyst hype. Personalising the service now ranks high on the agenda, as illustrated by market leader Groupon rolling out its deal personalisation feature in a bid to up consumer interest. Analysts such as Forrester have previously predicted that consumer fatigue with daily deals will set in if they continue to receive offers they are not interested in.
Yelp completed an IPO in March, which valued the firm at USD1.43 billion, but the firm’s losses widened 250% year on year to USD9.8 million during its first quarter as a public firm as marketing costs grew. Despite revenues climbing 66% to USD27.4 million during the same period, the firm still faces increasing competition in the local recommendation space. Google is making a concerted push with its acquisitions of Zagat and Clever Sense in recent months, while Foursquare is also positioning itself as a competitor as it continues to move beyond check-ins.