Although daily deals are convenient for users, many will receive an overwhelming amount of notifications and emails each day. While localized deals may be a hot commodity at the moment, not everyone might be inclined to be bombarded with offers during different times of the day.

“Daily deal sites like Groupon target services instead of goods, which is generally an area that is untapped in advertising,” said Mark Beccue, Tampa-FL-based senior analyst of consumer mobility for ABI Research.

“They function like juiced-up impulse buys, but they also become irrelevant to many consumers,” he said.

Slim pickings
According to Mr. Beccue, companies such as Groupon and Living Social need to be both curated and aggregated to grab the attention of consumers.

“Daily deals need to be personalized in order to be effective,” Mr. Beccue said. “Mobile is a great platform to tag into personalized, edited content for the daily deal companies because mobile is quickly becoming the ideal platform for commerce.”

For example, Mr. Beccue points to Web sites like Gilt Groupe  that have established a niche, small demographic as a company who are using a daily deal to effectively target consumers.

“Gilt Groupe curates specific companies, and users go to the site because they’re looking for specific products,” Mr. Beccue said. “In order for a daily deal company to target its consumers, it must offer curated, aggregated content that takes the work out of deal-seeking for users.

“It helps when you’re dealing with a specific market in one area,” he said.

Mr. Beccue also points to the recent launch of the T-Mobile More for Me. He believes that the company has figured out that tailored content is key for daily deals.

With More for Me, T-Mobile users with phones running Android 1.6 or later can set preferences, including location and interests, to get daily deals from T-Mobile.

Bad news for small merchants
Usually, daily deal sites are known to be supportive of small businesses because they are able to partner with big companies to promote themselves.

However, with the stiff competition between daily deal companies, that might not be the case in the future.

“It is not easy to get awareness, especially if you don’t have a really compelling set of merchant offers,” said Sucharita Mulpuru, vice president and principal analyst of ebusiness and retail at Forrester Research, Cambridge, MA.

“Plus, the compelling merchant offers take time and money to procure,” she said.

In general, Ms. Mulpuru believes that eventually there will be a shakeout in the daily deal industry, but admits it has not happened yet.

“I think that the more likely outcome will be on things that aren’t visible to consumers, such as merchants being able to pick and choose their offers and merchants getting better terms on the deals they do,” Ms. Mulpuru said.

Narrow the focus
Daily deals originally took off because they were able to offer consumers deals and promotions they could not find elsewhere on the market.

However, once many companies jumped on board with the new platforms, consumers felt overwhelmed with the amount of content they received every day.

Now that the content is available to consumers, companies have to find ways to make it relevant and personalized with their everyday lives.

“In the future, I think we’ll see more daily deal Web sites recognizing the need to tailor their content with consumer thinking similar to, ‘I’m only interested in the stuff I want and when I want to be told about it,’” ABI’s Mr. Beccue said.

“Daily deals will become more sophisticated in the future with customized and aggregated content,” he said.