Daily deals sites had their hot moment. Then they had their backlash moment. Now they’re trying to have a mature moment. Three years in, and the industry is tasked with figuring out a sustainable business model that doesn’t spam, kill local businesses, or die out as a fad. The way they plan to do that, thus far? DIVERSIFICATION! At least, that’s how LivingSocial Ceo Tim O’ Shaughnessy sold it at Business Insider’s Social Commerce Summit in New York this afternoon. O’Shaughnessy said the company will avoid losing relevance with consumers by focusing on specialized categories like travel and family. LivingSocial Adventures, Escapes, Families and Instant all launched in 2011, and the company is “pushing hard” on its new products. Still, LivingSocial lost $558 million last year on $245 million in revenue. O’Shaughnessy attributed the loss to investing in new product development (like LivingSocial Adventures) and putting feet on the ground in its local markets.

Groupon has been doing the same thing with specialized verticals and new products. The company has in the last quarter or so rolled out products like Groupon Now, its instant sale platform, Groupon Rewards, its loyalty program, Getaways (travel), Live, (entertainment) and Goods (products). Groupon’s first ever earnings call is tomorrow, where analysts expect it to report growth in revenue and billings to have shrunk by half.  That kind of decline is significant, but considering the company experienced 400% year over year growth in Q3 last year, a 200% growth rate is still pretty stellar. Mark Mahaney, an analyst at Citi, wrote that continued upside in Groupon’s stock price requires success in its new segments like Getaways, Goods etc.

I’m not convinced it’ll work because we’ve already seen diversification fail at one of the biggest daily deal success stories, Gilt Groupe. The luxury goods company for a few years could do no wrong, but now it appears to be struggling with its new verticals. It’s food, men’s and travel sites–Gilt Taste, Park and Bond and Jetsetter–were among the categories affected by the company’s recent round of 80 to 90 layoffs a last month (remaining employees from BuyWithMe, which Gilt acquired in November, also got the ax).  Gilt’s local deals arm Gilt City has also struggled to gain traction. Plans to add new cities have been scaled back and Gilt City’s Chief Revenue Officer Caroline Bekkedahl, who the company hired from Mochila in July, was let go last month. Nate Richardson, who ran Gilt City is also rumored confirmed as out. A Gilt rep actually took the stage at this conference, but the moderator unfortunately didn’t stray from softballs like “Omg Gilt is so successful! Tell us about it!”

Maybe it’s a luxury thing. After all, other luxury sale sites like Lot18 and RueLaLa have also undergone layoffs. But for every layoff at a luxury deal site, there’s probably 100 Groupon-wannabes that flat-out tanked. O’Shaughnessy didn’t provide any specifics on traction LivingSocial has gained (or has not) on its new verticals other than to say the company’s geotargeting mobile product has worked “reasonably well” in some markets and “not particularly well” in others. I’ll be looking closely at Groupon’s 10-Q tomorrow for signs of life outside of its core product. As the backlash to daily deals sits fizzles into general malaise, diversification is the industry’s best chance at success.