Why are Facebook and Yelp shutting down their deal programs?

Posted Originally on Dailydealmedia.com by Jimmy Hendricks, Co-Founder and CEO, Deal Current

Facebook did not make a full entrance into the industry. The reality was they were testing out aggregation, something that Yahoo, CitySearch, and what a dozen others are doing currently. Facebook was not sourcing their own deals. They were an affiliate partner of other companies like Zozi, Groupon, LivingSocial, and several others. Deal quality is what wins in this space. Facebook’s deals were not theirs, and the company was transparent with consumers that the deals they featured were not their own. As such they were not able to create a following. It would be as if you created your own Facebook page, but just had 10 other people comment and update your posts for you. Of course, it’s only a matter of time before people realize what’s happening and just ignore your posts altogether – or unsubscribe.

The other reason why it makes sense for Facebook to temporarily shut down their deal program is because of the old adage saying “local advertising is sold, not bought.” Groupon and media companies need an aggressive outbound sales teams calling or in market street sales team. This doesn’t fit Facebook’s model. They are a technology company, not a sales company. Facebook was planning for deals to be self-setup and the evolution of the market says this may not happen or it’s far off – there are many examples of this.

Yelp seems to have shut down their program for a different reason. Yelp realized that offering increasingly great deals is the only way to win in this game, not just more low quality deals. Also my guess is, one of their troubles is that their sales force is predominantly inside sales and merchants self-manage their ads (like Facebook, another example of a technology company trying to foray into the bloody red ocean where sales companies feed). Deal Current believes the key to success is having an outside sales team who meet in person with merchants.

The Bottom Line: This news is good for independent programs, media organizations with existing sales teams, and software providers because of the following reasons:

1) It shows that the companies that are going to win in this space are the ones with outside sales teams.

2) Not having Facebook and Yelp in the game is a positive thing. Deal sites still leverage social sharing in a big way and use Facebook’s superior ad targeting to drive sales. Now deal sites don’t have to worry about Facebook blocking 3rd party deal sites or being overly selective in approval.

Additional thoughts:  Here are some things that we remind our partners on every day:

1) Deal Quality is everything – run good deals, if you don’t have a good deal, don’t run a deal, wait until you have a good deal. This builds your brand.

2) Focus on Deal Match – make sure your deals match your audience. You should have a target customer in mind (age, gender, income, location, interests, etc.), match your deals to them. This builds loyalty.

3) Focus on creating great deals, and promote the heck out of them (not just your program). This creates excitement.

Overall having major players bow out doesn’t mean the market is dying. I believe it proves it’s not as easy as people think and therefore not for everyone, which also makes the strong case that deal sites should partner with a technology provider to build their program.