Scoutmob Field Notes

Well now. Facebook is out of daily deals. Yelp cut back on daily deals. Thoughts on this evolving space from Scoutmob co-founder and CEO Dave Payne:

This morning I read a very good story by Greg Sterling on Yelp’s decision to reduce focus on its daily deal product.  This follows right behind Facebook’s decision to exit daily deals.  Exactly a year ago we started talking with investors for our Series A and they all asked “how will you compete with the big boys once they decide to enter the space.”  It’s a year later and many “big boys” have come & gone, so I figured I’d share a few initial thoughts.

This time last year the pure-play daily deal sites that were mainly Groupon copycats were slowing down because fewer venture firms were willing to fund tens of millions of dollars in customer acquisition costs (which were increasing rapidly).  On the horizon, though, was Facebook, Yelp & Google who were bound to enter this space and crush all the upstarts (including Groupon, Living Social & Scoutmob).  Each of these companies came with different assets, but all of them had one thing in common…they were big, scalable platform companies.  Platform companies are fantastic if they can scale quickly (like these could), but they are not accustom to the high-touch relationship necessary to be successful in local advertising.  The companies that have found success in the past (eg the alternative weeklies like Village Voice or coupon magazines like Clipper) have the DNA required to focus an inordinate amount of resources to identify, communicate with and close quality local businesses.  This is not a problem that can be solved with a server and an iPhone app.  Over the past few months this has become apparent to Facebook & Yelp, so they decided that focusing on their core businesses - platforms - is their best bet.

The other two platform companies that come to mind immediately are Google & Foursquare.  They both made very different decisions from each other (and Facebook/Yelp).  Foursquare decided that aggregation was the way to go, announcing that they were going to aggregate a few more traditional daily deal offerings, while Google decided to jump headlong into daily deals by putting enough resourced behind their offering to compete locally in a healthy way.  I’m glad to see Google deciding to go against their DNA like this and look forward to watching how they do.

It’s worth noting that both Facebook & Yelp will continue to do self-serve deals, but this will take years to really catch hold among small business owners.  At this point in local online advertising, local merchants need lots of support.

Greg’s main point in his article was that Yelp determined that deal quality would suffer if they under-resourced this effort.  I completely agree with this point and would urge all daily deal companies to focus on brand & deal quality.

Above are three examples of daily deal emails that I received just this morning.  Which do you guess would most engage a local audience over time?