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If there's a sexy space on the consumer internet right now, group buying is it. Although there are arguments about whether or not market leader Groupon's first national deal with Gap was really as successful as it appears on the surface, one thing is for sure: companies large and small smell big money in group buying deals.

One of those companies is Yelp, and although it has plenty of competition, Yelp may be one of the few upstarts with the potential to put a dent, even if slight, in Groupon's rise.

Although Yelp is still testing it out on a limited basis, Yelp Deals is clearly modeled on Groupon. In short, there's a deal for a local business that lasts one day. Simple, but profitable for the most highly-trafficked group buying websites.

But while many different kinds of companies, including newspapers, are looking to exploit the group buying model, Yelp's advantage is its strong following is key cities -- cities where Groupon also happens to be extremely popular. And unlike Groupon, which largely has a one-to-one relationship with its subscribers/customers, Yelp is a full-fledged community.

That, in theory, means that Yelp has the opportunity to build stronger relationships with Yelp Deals buyers, as they're using already Yelp on a regular basis to find and review local businesses.

Additionally, Yelp has a potential SEO advantage: it is promoting deals on reviews pages, and these pages often rank very highly. So someone doing a search for a specific restaurant, for instance, might find a Yelp reviews page for the restaurant on the day a deal is being promoted. That, of course, could conceivably lead to a few sales.

Even with its potential advantages, however, Yelp will still face some significant challenges in making a splash in this market. For one, it's getting a late start. But even more importantly, it's audience may not be a good fit for local businesses. After all, if Yelp Deals provides bargains at already-popular local businesses, those local businesses may find that Yelp isn't really delivering new customers insomuch as it's delivering repeat customers who welcome the opportunity to pay less for what they'd buy anyway.

Finally, as with Yelp's increasing list of commercial relationships and initiatives, it remains to be seen whether Yelp Deals could harm the perception that Yelp is independent forum for consumers to review local businesses.

At the end of the day, one thing is clear: group buying offerings will continue to proliferate on a variety of different kinds of online services. Those like Yelp, which already have a local focus and a large audience, may have the greatest opportunity to get a piece of an expanding pie, but what type of audiences will deliver the greatest ROI for all parties involved still remains to be seen.

Patricio Robles

Published 27 August, 2010 by Patricio Robles

Patricio Robles is a tech reporter at Econsultancy. Follow him on Twitter.

2394 more posts from this author

Comments (2)

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Bien and Robinson

Am I the only internet-industry worker who believes Groupon is going to fail ultimately.

The idea just isn't that good. I don't care how successful it is now, in the long run it'll never work. If a company wants to make promotions and give away great deals--they can do it themselves, and really reap the benefits.

Eventually companies will realize Groupon is NOT GOOD. I literally have no idea why everyone is on this website's nuts so hard.

about 6 years ago

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Patrick Everard

Interesting article, bad blog implementation: Don't know what you've done wrong, this should be pretty straight forward, but your TweetThis button doesn't work on my MacBook Pro, neither in Safari, neither in Chrome, had to go to Firefox to post my tweet!? I had to go three times through the super annoying authentication/Captcha procedure for LinkedIn Groups, awful, awful, awful. Thanks God your article was interesting.

almost 6 years ago

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