Deal mania is in full swing. Already a multi-billion dollar industry after only a couple of years, daily deals have captured the attention of traditional publishers, media companies and a host of online competitors. The phenomenon has also exposed the value and potential of the local market to those who didn’t recognize it clearly before.

The fast-growing deals segment is not without challenges and problems, however. Skeptics and detractors question the value of the deals product for local merchants as well as the sustainability of the model in general. As consumers and increasingly savvy “deal seekers” gobble up aggressively discounted offers, an expanding army of telephone sales reps seeks to capture local merchant marketing dollars. Accordingly, many small and medium-sized businesses (SMBs) receive multiple calls per month (even per week) from an increasing array of deal sites and vendors.

Many local merchants are attracted to the tangible and low-risk nature of the daily deals model (“customers not clicks”). However many have also been burned by a lack of education and planning. While some SMBs have enthusiastically embraced daily deals, even shifting budget from other marketing channels, a vocal minority is now speaking out against daily deals as bad for merchants.

Notwithstanding these critiques, daily deals are here to stay. They build upon Americans’ long-standing love affair with coupons and retail sales. Coupons and discount offers, more than other forms of advertising, have a proven ability to influence consumer behavior, according to several studies conducted by the National Retail Federation and BIGResearch.

While the consumer behavior behind the daily deals phenomenon is well established, the specific daily deals product will necessarily evolve and change. Competitive pressures, merchant demands and fickle consumers are forcing an evolution even now. A kind of “land grab” is underway. Deal providers are trying to build scale and position themselves to own as much of the value chain as possible. With relatively few barriers to entry, a host of companies has joined the deals fray.

Just in the past year deal competitors have mushroomed to more than 400 vendors and sites. The current market cannot sustain 400 providers, however. Most companies without sufficient scale or a dedicated niche will be marginalized in the near future. Winners and losers will likely emerge over the next 18 months. Indeed this period will be pivotal in determining the nature and structure of the US deals market going forward.