Daily Deals Shakeout

It’s a glass-half-empty, glass-half-full kind of thing.

On the one hand, there is a shakeout underway in the daily deals business. By some estimates, one-third of the almost 600 daily deals sites that were in business at the beginning of 2011 have since either been sold or shuttered. Facebook shut down its daily deals program last August after a four-month trial. As Facebook execs certainly should have known, there is value in getting in first and defining the terms. As much as consumers like to grouse about the daily deals emails that fill up their in-boxes every morning, it turns out that it is a model to which consumers have become accustomed. When Facebook tried to shoehorn deals into its social network, consumers were underwhelmed.

Meanwhile, Google’s run at the lucrative market has been a fairly plodding mix of acquisitions and city-by-city growth that certainly isn’t keeping Groupon execs awake nights.

On the other hand, while the lows may be getting lower for some deal providers, the highs are definitely higher for others. According to a report issued by deal aggregator Yipit, the number of deals offered in September increased 6 percent in August. And gross revenue from those deals jumped 12 percent.

Gross revenues for the industry’s second largest site, Living Social, increased a whopping 32 percent, largely because of a record-setting half-priced coupon for the Whole Foods grocery chain that it offered in the second week of September. One million coupons were sold, and the deals site acquired hundreds of thousands of new subscribers in the process. In fact, according to Yipit’s data, LivingSocial grew more than five times as quickly as Groupon in September, although it still earned less than half the gross revenue of Groupon.

AmazonLocal is providing another sign that the death of daily deals has been greatly exaggerated. The new service, which, by virtue of Amazon’s investment, is now inextricably intertwined with LivingSocial, is the number four site in revenue in North America, behind Groupon, LivingSocial and TravelZoo.

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