LivingSocial expected to lay off 400 in U.S.

http://www.bizjournals.com/washington/blog/techflash/2012/11/major-layoffs-set-for-livingsocial.html

by bonzoesc • 14 years ago

41 43 14 years ago

jcromartie• 14 years ago

During their hiring explosion, I had a hunch that I shouldn't have gone forward with an interview there. I think I made a good decision...

Something in my gut just said "who cares?" about the work. I couldn't get a straight answer on what I'd be building or why I should believe they would keep growing.

dm8• 14 years ago

Honest question, why daily deals sites are imploding all of a sudden?

mdonahoe• 14 years ago

Because they all copy each other

moocow01• 14 years ago

I think for the most part daily deals were a macro- experiment. Everyone jumped on board - startups, businesses of all shape and sizes, as well as end-customers with high hopes everyone would win.

I think what were finding out through the experiment is that it just isn't really sustainable for much of anyone. I dont know if that segment will be disappearing anytime soon but the model will have to adapt.

ChuckMcM• 14 years ago

I agree and I think it is an important insight. Why did everyone jump onto this thing?

My intuition is that the turbulence in media, from mp3 players to PVRs to online newspapers to Netflix and other on-demand video experiences has seriously damaged the way in which small business would "talk" to their potential customers. This is a gaping hole that has yet to be well served.

So I wonder if the macro experiment was that something like Groupon would replace it those other forms of outreach.

bradly• 14 years ago

It feels like the deals have gotten significantly worse over time and now it just feels like they are selling coupons.

ceejayoz• 14 years ago

It's the same here (Rochester, NY). Groupons used to be to fun events, nice restaurants, etc. Now they're laser toe fungus removal and pseudoscience.

thaumaturgy3• 14 years ago

The "daily deals" model seems to depend on a few things to be successful; if any of these doesn't work, then the model is in trouble:

1. It has to offer something compelling. The daily deal is asking a potential customer to commit now to buying something; if the customer could spend just a little bit more to get that thing at their leisure (or if they don't really care whether they get that thing or not), then they will.

2. So it depends on a supplier making an offer that is substantially better than any offer they're making anywhere else. This is bad for suppliers, as it can weaken their relationships with long-time distributors.

3. So the supplier will want to see the daily deals system reaching a market that they couldn't otherwise reach -- maybe a particular demographic, or a very large advertising-adverse market, or a lucrative and otherwise impenetrable local market.

4. And that market has to have disposable income to spend on things they don't really need, and the desire to do so.

Unfortunately, the various goals here are all mis-aligned. You can't really expect the same market to buy something from you every single day, especially if you're offering high-ticket items, so you can never reliably expect to extract purchases from more than a percentage point or two of your market. This is not at all attractive to your suppliers, who will turn to other forms of distribution that might be more lucrative -- they could for example just run a sale on their own site, get picked up by a deal aggregator like dealnews.com, sell items for slightly more than they would have otherwise, and maybe the customer will buy something else while they're there.

So then the daily deals sites become a clearinghouse for stuff that suppliers can't sell elsewhere, and that cheapens the daily deal site in the eyes of its market. (Woot.)

I think a better, more reasonable model would be an "irregular deals" site -- a site that waited until they got some really amazing offer from a supplier, and then blasted that out to this huge network they built up. Because it's irregular, they'd get more of the market purchasing each time, and because the deal site is focusing exclusively on high quality offers, they'd be able to build up a much larger, more committed market.

MatthewPhillips2• 14 years ago

It's not profitable for the customers (mostly small businesses). They take big losses for the events and don't acquire repeat business. The consumers who partake are only doing it for the deal.

RandallBrown• 14 years ago

Maybe for some businesses it's not profitable, but it could be fantastic for places like a restaurant.

Every time I buy a groupon for a restaurant it's one I haven't been to before. It's never enough to pay for more than 1 meal and I don't really ever go alone. I usually buy a drink, soft or alcoholic, they're high margin. If I like the food it's on my list of places that I'll go back to. If I don't like the food, they still made some profit.

I think the problem is that these daily deal companies scaled way too fast. Instead of getting profitable in one city and growing, they tried to go nationwide and hired gigantic sales teams. Then, to make quick money they started selling terrible products and people lost interest.

fudged71• 14 years ago

They all fed off of the same positive network effects of the social networks, without the consistency.

I know within my own network, they were cool for a while because you got some great deals if you all worked together and shared the deals with others... but after a while, it just turns into spamming your friends, and the deals were getting less and less attractive and rare.

unohoo• 14 years ago

Here's why things are headed downwards - There are way more reasons as well, but these are the most significant:

1) Victim of its own success. Groupon, LS expanded way soon, way fast. Daily deal sites start popping around all over the place creating chaos and irritation for both the merchants and the customers (merchants bcos the same merchant gets solicited by 10 diff daily deal sites - customer bcos now you're unsure which site has the best deal and too much email)

2) The last part of (1) above can be listed as merchant and customer fatigue.

3) Its uneconomical to hire and retain salespeople in big cities like Chicago/DC etc. For this model to work, the sales team should be in a extremely low cost area. Sales team will be one of the biggest expense for such a company/startup

4) Groupon / LS are not proving effective ROI to merchants

5) Novelty factor has worn off -- making it difficult to keep customers engaged. Now, the customer is engaged only if its an awesome deal from an awesome merchant. For the remaining merchants, the purchase pattern is more driven by 'need' -- not so much impulse any more. For eg: Meh - I need to get oil change done. Might as well check on Grpn/LS to see if there's a deal being offered.

w1ntermute• 14 years ago

I'd like to know this too. I've never used any of these sites.

Kopion2• 14 years ago

Maybe Hungry Academy wasn't such a good idea after all...

joshbert• 14 years ago

Maybe the fact that this company created it wasn't optimal, but I still think it's a very solid idea.

Kopion2• 14 years ago

Yes, I agree that it is an excellent idea.

mythrowaway2• 14 years ago

But now so aptly named.

alxbrun• 14 years ago

bananafoster• 14 years ago

FWIW, I applied to Hungry Academy and made it to the interview round, where they flew me to DC and put me up in a downtown hotel.

I was sort of boggled that they flew in and housed about a hundred applicants, some from as far away as China.

If you can afford to do that, great, I guess - but clearly they couldn't. In fact their first massive loss announcement (of almost $600MM) was about a week later.

Domenic_S3• 14 years ago

I still wonder about the daily-deal business model. The premise that loss-leading discounts will spark increased retail-price customers is losing its believability. In my circle I've never heard a business referred to as "that place I found on Groupon" -- I've really only seen it used as a marketplace for deep discounts on one-time (or nearly one-time) purchases. A groupon for skydiving or a guided tour? It doesn't make any sense.

For the businesses fueling daily deals, the cost of customer acquisition skyrockets. For customers getting the deal, returning to the business to pay full price is hard to swallow. It's going to take some real business intelligence to turn these daily deal companies around.

That said, my heart goes out to the 400+ employees looking at lose their jobs before Christmas. That sucks, a lot.

brianbreslin2• 14 years ago

I don't think daily deals was the end-goal. Getting small business customers was.

Domenic_S3• 14 years ago

If the small businesses take a bath on the daily deals though, you've alienated the small businesses instead of gaining them.

druiid• 14 years ago

Well, I can say about the same thing in my experiences. I personally have purchased a good number of the 'daily deal' kinds of things (including from LS), and have returned to a grand total of one. Pretty much among my friends it is much the same story. I think in general the 'deal' market was highly hyped for a product that wasn't providing (and still continues to not) a good value for the actual customers of the deal sites (the businesses, not the users).

brianbreslin2• 14 years ago

My guess is a large % of these laid off workers will be sales people in the disparate cities. Call center workers too.

LS seems to be going after small businesses but w/a different end goal than groupon, groupon looks like it wants to be the merchant provider for these companies, LS, not sure.

daniel-cussen• 14 years ago

Does anybody else remember the articles about Tim O'Shaughnessy in entrepreneurship magazines?

http://www.inc.com/magazine/201203/liz-welch/the-way-i-work-...

Stepping back a bit, I'm starting to see a pattern. One day, the magazines are like, "Bobby Clampit built Something2.0 out of his own golden shit with his bare. ALONE." Ten month later we have an announcement that reads "And, ah, Something2.0 announced 2,000 layoffs, whoops, the core co-founder team is releasing statements that..."

patmcguire2• 14 years ago

Are we back to headcount as a success metric? The most surreal thing I remember about Startup.com was the company going "oh no, we're in trouble" every few months, doubling in size, and then going "oh no, we're in even more trouble."

incision2• 14 years ago

Can't say I'm surprised by this.

I pass their fancy offices [1] all the time, but I'd have a hard time naming anyone who uses their deals regularly.

They've gone from expanding rapidly [2] to laying off heavily in 7 months.

It's a shame as they were often touted as a success story for tech [3] and business in general in the area.

1: http://www.businessinsider.com/living-social-office-tour-201...

2: http://www.washingtonpost.com/blogs/capital-business/post/li...

3: Yes, I know tech is relatively small part of the daily deals business. I'm talking common perception.

thaumaturgy3• 14 years ago

Wow. Look at all that money spent on things that didn't make their business better.

untog2• 14 years ago

Yes and no. While you can go too far with it (and I'm not judging whether LS did) having a nice office makes workers happier, and more likely to stay. Providing free food means they are less likely to leave the office, etc. etc.

It's not a total waste of money, but it can be.

TillE• 14 years ago

Except for the giant screen, I don't see much that looks particularly extravagant. Too much space (why all those meeting rooms?) and too many employees, probably, but it's hardly Ion Storm.

rwhitman• 14 years ago

The thing that leaped out at me from those galleries is the obvious evidence they were building a headcount empire...

The rock climbing wall and big TVs don't strike me as quite as outlandish as the sheer number of workstations and chairs stuffed in the conference rooms

hkmurakami• 14 years ago

A percentage figure gives us a much better idea of what the scope of this layoff will be.

> LivingSocial, which has raised more than $800 million in funding, entered 2012 with a staff of roughly 5,000. The company’s most recent publicly disclosed headcount stands at “more than 4,500 employees,” according to its website.

So that's around 8-9% of its workforce.

LivingSocial expected to lay off 400 in U.S.

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