Wednesday, Dec. 07, 2011

Daily Deals Sites Suffer a Backlash

For the past couple of years, daily-deal sites like Groupon and LivingSocial have become wildly popular, offering users incredible deals on everything from restaurants to spa treatments to fabric softeners. Earlier this year, Groupon went public with the largest IPO by a U.S. Internet company since Google. But amid the Groupon hoopla was a fear that daily-deal sites were overhyped and overvalued — the next Web bubble in the making, this time inflated by a zeal for anything "social." This year, 170 of the 530 national daily-deal websites disappeared, according to daily-deal aggregator Yipit. Facebook Deals was pulled after a four-month test, and Yelp scaled back its daily-deal arm. Even the long-term sustainability of daily-deals king Groupon has been questioned. On the eve of going public, Groupon had to revise its reported revenue to "correct for an error," causing many analysts to suggest steering clear. The offering went off smoothly, and the stock prices rose initially. But by late November, the company's shares had fallen below their initial offering price of $20.