Are Daily Deal Sites Dying Off?

No one will deny that Groupon struck gold by bringing daily deals to locals all around the country. But like the original gold rush, not everyone who goes in search of riches ends up finding it. Groupon knockoffs are having a tough go on the Web, and so are deal sites in general.

According to a report in The Wall Street Journal, roughly a third of all daily deal sites in the nation have called it quits so far in 2011. To attach some hard numbers to that claim, WSJ says exactly 170 out of 530 daily deal sites have fizzled out so far, and there are still more than three months left in the year.

Part of the problem is it's simply too expensive to run a daily deal site. It takes a great deal of marketing to get the word out, and even then, there are so many competitors that it's easy to get overlooked. Consider that Groupon invested upwards of $378 million in marketing for the first half of 2011 alone, up from $35.5 million one year prior. And then there's the employee costs, commissions, and so forth.

Even Yelp isn't immune to it all, which announced plans to scale back its daily deals efforts by cutting its staff in half. Part of the problem with Yelp, however, is that it would email "local" deals that weren't always just down the street or even down a few blocks.

"The space faces some real challenges... while consumers love it when you can offer them a great deal nearby, they're not so stoked when you email them a restaurant deal for a place in Berkeley, CA when they live across the Bay in San Francisco," Yelp explained in a blog post.

Do you subscribe to any daily deal alerts? If so, which ones are you favorite?