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As ProJo Launches Deals Service, Doubts About Model

The Providence Journal's Groupon-style daily deals service, announced a few weeks back, is now operational. The paper is promoting it heavily on its web site, projo.com.

As I've written in this space before, there are some analysts who contend the market for daily deals sites is saturated. But that's not the opnly concern. A couple fo days ago, the New York Times reported on merchants' growing disillusionment with the model:

Like businesses across the land, the Madison Avenue spa Wellpath tried to drum up customers by running heavily discounted coupons on deal-of-the-day Web sites. But the Internet coupon fad is shrinking faster than fat from a weight-loss laser.

Coupons for the spa drew women from around the metropolitan area eager to see their bulges melt and their wrinkles removed. Once.

“Then they would get another coupon and go do it with someone else,” Wellpath’s director, Jennifer Bengel, said. “There was no loyalty.”

Just a few months ago, daily deal coupons were the new big thing. The biggest deal maker, Groupon, was preparing to go public at a valuation as high as $30 billion, which would have been a record amount for a start-up less than three years old. Hundreds of copycat coupon sites sprung up in Groupon’s wake, including DoubleTakeDeals, YourBestDeals, DealFind, DoodleDeals, DealOn, DealSwarm and GoDailyDeals. Deal sites were widely praised as a replacement for local advertising.

Now coupon fatigue is setting in. Groupon’s public offering has repeatedly been put off amid stock market turmoil and internal missteps; the company says it is back on track, but some analysts say it may never happen. Dozens of copycats are closing, reformulating or merging, including Local Twist in San Diego, RelishNYC and Crowd Cut in Atlanta. Facebook and Yelp, two powerhouse Internet firms that had big plans for deals, quickly backed off.

 

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