The next phase of growth for local deals will be mobile. Groupon knows this, and so does Yelp, which today is rolling out Yelp Deals to its iPhone and Android apps. An update to its mobile apps that is getting pushed out today will add a new deals icon to the app. When you click on it you can see a list of nearby Yelp Deals for discounts at restaurants, spas, and other businesses. (These are in addition to Yelp Special Offers and Check-In Offers, which already appear on mobile).
Yelp started offering daily deals at local merchants about a year ago, and it now has deals in over a dozen metro areas, including San Francisco, New York, Chicago, Boston, LA, Phoenix, Seattle, and San Diego. You have to sign up for these deals currently and you get an email when there are new deals, just like with Groupon or LivingSocial.
With Yelp Deals on mobile, you can search for nearby deals when you are walking around, and they are instantly redeemable. You get a redemption code that you can show the merchant right from your mobile phone. This is similar to what Groupon is trying to do with its Groupon Now mobile app, which is only available in a handful of cities (fewer than Yelp Mobile has out of the gate).
Yelp has one big advantage here over Groupon. It’s mobile apps are already very popular. They are used by 4.5 million people a month. Meanwhile, Groupon is trying to spread Groupon Now through deals with other mobile apps, such as Loopt. Yelp also has a large local sales force, much like Groupon, which is the key to getting local merchants to sign up for these deals.
The key is to get liquidity on both sides of the equation: users and deals. Yelp already has the users on mobile. But getting the deals will require a slower roll-out and a lot of phone calls. That is why Yelp Deals are only available in a dozen metro areas, and it’s taken a year to get there. And the deals come out once or twice a week, not every day. With mobile, there is the extra challenge of getting enough deals in dense geographic areas so that the likelihood of seeing a nearby deal when you launch the app is high.
You just need a lot more deals than you do through the current email marketing model, which gives people more time to plan their tris so that they can take advantage of a deal. The mobile model is more impulsive, but it also requires a greater density of deals for it to work.
This is going to be a long race. Yelp and Groupon are among the first to get off the starting line.