Why Yelp's Daily Deals Could Be A Groupon-Killer

Yelp has been quietly testing a Daily Deal offering in Sacramento for the past few weeks, according to a Yelp community manager, Olivia Loy, on their discussion thread (screenshot below).

Yelp daily deals

The offer described is $45 worth of salon services for $20, available for a limited time, where consumers pay in advance. Sound familiar?  The message board also references a deal at a restaurant named “Taste of Tuscany”.

Why Yelp Could be a Winner
As you know, we’re extremely bullish on the publisher opportunity in the Daily Deal space, and Yelp might just be the best positioned of them all. Here’s why:

Yelp already has authority. Users have been relying on Yelp to decide their local consumption for years.  If this local authority translates to a higher conversion rate per deal, Yelp’s users could become more valuable than those of other Daily Deal services.

Yelp already has distribution. At over 33 million monthly visitors, Yelp more than quadruples Groupon’s subscriber base. And compete has Yelp.com’s traffic at more than twice that of Groupon’s.  If Yelp focused on driving its visitors to its Daily Deal product, they could very quickly build a huge audience.

Groupon vs Yelp

Yelp already has a sales force with relationships with thousands of small business advertisers. One of the struggles of the Daily Deal space is scaling operations to multiple cities.  Yelp already has a sales force reaching 50+ cities.

Yelp already has a killer mobile app. TechCrunch reports that 27% of Yelp’s searches are performed on their iPhone app. The iPhone app is quickly becoming a must in the Daily Deal space as a way to lower the friction of redeeming the offers.

What Yelp’s Daily Deal Product Should Look Like.
If Yelp just rolls out a Daily Deal clone, the product won’t live up to the promise.  Users can’t think of Yelp’s Daily Deals as advertising.  Instead, we recommend Yelp launch a product positioned as more of a reward / perk to the their community:

  • Only Business With at Least Four Stars. Yelp doesn’t have authority, its community does.  So, Yelp needs to highlight deals from businesses that the community likes.
  • Exclusive Discounts.  The deals should be available to all visitors but Yelp community members and elite Yelpers should get a slightly better discount. Not only will these deals feel exclusive to the Yelp community but it will encourage more people to review businesses. Perhaps elite Yelpers could invite their friends to share their better discount?  Perhaps people who have checked in to the business get a larger discount (as a way to encourage more check-ins)?
  • Email Distribution.  Email is key in the space and for Yelp to sell enough deals, they are going to have aggressively push email alerts.
  • Manage redemption from the Yelp mobile app. Reduces friction associated with printing the coupon.

Jim Moran is cofounder of Yipit. This post was written for Yipit’s blog, and is republished with permission.

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