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Google’s takeover of portal deals site DailyDeal about a year ago for $114 million was one of the great success stories of the German startup scene – and a very tidy outcome for founders Fabian and Ferry Heilemann (pictured above).

Now, according to our sources, Google has laid off a larger number of staff – some of them in senior positions — mainly in the areas of sales and marketing. A Google spokesman confirmed news that it will reduce the DailyDeal team and not renew certain contracts.

The deals site team, led by Graham Law and Matthew Scott Sucherman, will in future focus more on the integration of the platform with other Google products, in particular Android, Maps, Adwords, and Adwords Express. No further specific details were given, including the number of layoffs.

Daily deals – a difficult business model

Recent months have shown the daily deals and coupon industry is not a simple one to nail. In Germany, earlier this year, Marcus Seidel still achieved reasonable success with his exit of to the RTL group. In contrast, market leader Groupon’s share price has slumped, despite promising revenue results in Q1 2012, major financier Kinnevik recently bowed out of the company, and senior executives Daniel Glasner and Phillip Magin have left for reasons unknown. The company also attracted media attention for questionable working conditions and other standards earlier this year.

It’s not just Groupon – the Global Daily Deal Association (GDDA) in June acknowledged a general “lack of merchant and consumer confidence” and is working on a code of conduct in a bid to help the industry recover.

DailyDeal – from portal to what?

DailyDeal itself has largely stayed out of the headlines since its takeover by Google. The current restructuring, however, suggests it too may be failing to perform under a business-as-usual approach. Success would seem to depend on how well Google can integrate the service into its other advertising products. It wouldn’t be the first time Google canceled a project that didn’t live up to its hype – Wave is just one example. For now, though, the company reassures that it is holding onto the daily-deal model.

This story originally appeared on VentureVillage, VentureBeat’s Germany-based syndication partner.

This story originally appeared on VentureVillage. Copyright 2012

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