Yelp to Scale Back Deals Too

According to a report in Bloomberg Yelp is scaling back on the sales resources devoted to selling Yelp Deals:

Yelp will cut its sales staff dedicated to Yelp Deals by half, the company said yesterday. Facebook, the world’s largest social network, said on Aug. 26 it would shut down its Deals local-discount feature, decamping from a business it entered in April. Both services were started to compete with Groupon Inc . . .

At San Francisco-based Yelp, about 15 salespeople will be reassigned to other areas of the business, and the number of deals e-mailed to users is unlikely to grow, Vince Sollitto, vice president of corporate communications, said in an interview yesterday.

“Rather than offer more and more deals of inherently declining quality to more and more folks over time, we want to make sure we’re only providing good, quality opportunities,” Sollitto said. “While we think the deals business is a good one, it has never been a core focus of our offering.”

Like Facebook there are/were two types of deals on Yelp: self-service and more conventional daily deals sold by telephone. Yelp’s “special offers and announcements” were renamed “Yelp Deals.” It’s the daily deals offering that’s being scaled back. Similarly Facebook decided to shutter its daily deals program and retain its earlier “check-in deals” product (self-service).

Yelp’s retreat on daily deals is somewhat surprising, just like Facebook’s earlier move. As with Facebook, Yelp daily deals appeared to me to be a perfect fit and a great revenue opportunity for the site. However, there’s too much noise and competition in the market for both merchants and consumers.

Here’s an anecdote in the Bloomberg piece that sums up some of what’s going on with merchants and all the sales calls they’re receiving:

Merchants say that participating in the deals often leads to unsolicited calls from other coupon sites. After Kiebpoli Calnek ran a Yelp Deal advertising 50 percent off an aerial performance class in July, she began receiving calls from representatives of Groupon, LivingSocial and other deal sites every day.

“They send me e-mails, they call me, they call me again,” said Calnek, who is based in Brooklyn, New York. “I told them, ‘I’m burnt out from this deal. I have 500 new clients. Why would I want to do another one?’”

Again neither Facebook nor Yelp is exiting the “deals” business; they’re downsizing or scaling back. However, this may be the beginning of a period of attrition and consolidation. Alternatively one could look at it as part of the evolution of the deals market.

See also: Yelp CEO: 50 Percent Deal Margins Unsustainable.