Hyperlocal|August 30, 2011| Author: Kim LaCapria|Tags: ,

Does the Demise of Facebook Deals Signal the Impending Death of Groupon and Its Clones?

Late last week, Facebook backed out of the “daily deals” market, just four short months after striking while the iron was still relatively hot and entering the local group buying fray.

In the realm of hyperlocal trends, the localized offers market has been particularly volatile. And Facebook’s cryptic comments in a statement on the abrupt decision did not do much to quell the buzz about sustainability for daily deals. In a statement, a Facebook spokesperson commented on the decision to shutter the service:

“After testing Deals for four months, we’ve decided to end our Deals product in the coming weeks… We think there is a lot of power in a social approach to driving people into local businesses. We’ve learned a lot from our test and we’ll continue to evaluate how to best serve local businesses.”

Facebook- who will still offer limited deals with local check-ins- isn’t the only big name drawing back in the local deals sector. Local service reviews site Yelp has also pulled out of the game to a degree, and Yelp spokesman Vince Sollitto was lukewarm about the overall health of the vertical when he commented:

“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. While we think the deals business is a good one, it has never been a core focus of our offering.”

Just prior to the high-profile service closures, marketing consultancy Forester predicted a decrease in enthusiasm for the service:

“Consumers will grow so conditioned to micro-impulse offers that they’ll lose practice at considered decisions – in all walks of life, not just when buying spa treatments,” wrote Shar VanBoskirk, a Forester analyst and the report’s author. “Facing a cultural descent into maladroit judgment, employers (and spouses) will blacklist impulse deals to keep people intentional.”

With two big players out of the market, Groupon could have an edge over the smaller contenders still standing. But with frequent questions raised about the company’s financial health and Yelp and Facebook now virtually out of the game, the “bubble” impression is a bit difficult to shake.

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