Living Social lays off 400. Are daily deals dead?

The problem with Groupon (not sure if Living Social is the same model) is the fact that Groupons were not a good deal for most businesses nor were they profitable for Groupon itself. In fact it honestly wasn't the best deal for the customer either (i'll explain in a min).

Daily Deals are no different then any other form of coupon marketing. It works when structured right.

The problem for the businesses was that the vast majority of them could not afford to give 75%+ discounts to dedicated deal seekers. First in nearly all businesses a 75% discount means selling at a loss. Second since these are daily deals and often in larger cities many of those buying these groupons would buy multiple ones. They were deal seekers and thus unlikely to turn into regular customers.

Groupon of course should have been profitable but worried so much about expanding and pulling dollars out for executives that they were not. The customer was paying 50% and of that Groupon was taking half. The take away should be that Groupon's product is ok for Groupon. They merely didn't have the price controls in place. Many tech companies believe that profit is a bad word. They focus on growth. For a Facebook or Twitter that is fine. Growth will lead to profit. But Groupon's model was one that should have been profitable from day one. The fact they built it so it wasn't is just sad. Some people shouldn't run businesses.

Finally these deals were bad for the consumer. The business is offering 75% off but Groupon was taking 25% as their profit. Thus Groupons cost the customer double what they could have paid. Take away here is how we can show local business that massive discounts work. These businesses often would have been better off giving 50% off via normal coupons (paper, direct mail, etc.).

Daily Deals are not dead but the model that Groupon uses is flawed and businesses are starting to see that.

plus consumers are getting spammed several times a day by many deal sites. I rarely look at mine anymore. I doubt I'm alone. Plus the deals were not custom tailored enough by demographic. Some of them have a page where you can select category preferences but no consumers know about it. They want to spam you with endless nail salon offers but don't tell you that you can go to your profile and turn those off.

I think the deals will be around, there will be opportunities for deal aggregators now that the deal sites are running a bit lean (before most deal sites were hesitant to work with aggregators) , they'll prob work with aggregators for more customer traffic. Customers benefit by getting one email a day w/ offers from different deal sites. (think kayak for travel instead of subscribing to each airline and hotel etc..)

Also, there are opportunities for deal sites to let customers structure their own deals w/ social networking. They'll recruit and gang up w/ a few people to buy xyz product/service and get a competitive bid process going w/ vendors. Like putting out an RFP. Customer driven.

Businesses are stupid if they can't figure out how to make money from these though, and to negotiate on the % split to the deal site. My friend makes a killing in her retail product/svc biz from daily deals. She does the big half off to the customer on smaller portions of a service and is able to upsell them easily. Plus she gets their dang contact info and actually follows up! Additionally she negotiates the deal commission down to 20% instead of 50%, it's there for the asking since there is deal site competition. Boo hoo on the stupid business sob stories about deal sites, nobody forces anyone. If a business can't figure out what their costs are and negotiate/structure a good deal to make it work out, they don't deserve to be in business.

Social Couponing is the worst idea for business owners.

That's why GRPN has taken a dump since it's IPO.

Why does GRPN suck? Because they are NOT the business owner's customers.

They are GRPN's customers.

Think about it.

The world's WORST customers are the ones who only BUY on discount.

Two reasons I would avoid these as a business owner:

1. They receive no way to follow up with the consumer. Groupon and living social build the money list and spam the hell out of it every day with far too many deals.

2. The majority of the consumers are stone cold bargain shoppers. Even if I did receive their contact info, the chances of them becoming a valued return costumer is slim due to their fact of deal hunting.

The only ones benefiting from the entire process is the daily deal website but they seem to have forgotten about actually helping their customer....which seems to be showing in the latest news.

Daily Deals Companies are now a broken model, businesses are creating their own Daily Deals, cutting out Groupon/Living Social. Plus like mentioned above, most businesses aren't very good at follow up.

Im actually building a product now for a startup. Allows companies to make the deals, measure and followup or have them do it. Straight flat fee. Another good model would be signpost.com funded by Google Ventures.

It isn't going to die, but it's never going to be as big as it was a few years ago in the boom. The reality is, it does work for some companies, but too many have been burnt by it and didn't get a return to make it worthwhile.

Internet deal shoppers have no loyalty. It's about the price and absolutely nothing else.

LivingSocial and Groupon would have done far better 10-15 years ago when consumers had fewer options.

I still think Groupon's biggest mistake was not selling to Google...

When Google wants to buy you out, especially when it's a billion freaking dollars, the answer should always be "yes" - it means they are interested in being in the space you're in, and if they don't buy you they'll be buying your competitor and putting all of their resources to work against you.

Well some business owners don't help themselves. I have 2 instances recently that prove that.

Restaurant 1
Went there two days in a row to a restaurant as our groupon was expiring. They had run out of almost everything and would not extend the Groupon. Well, they lost a customer who has a family of 6 and groupon will give us credit for something else. No wonder, they were on a reality tv show because their restaurant was doing bad.

Restaurant 2

Never have been there and the first time went had a sign on the door closing early that day. Went again on a Saturday a few weeks later ( day before Easter) and had sign, they were closed for the weekend.

It is tough running a small business, but that is part of the deal, if you want to be successful. Lucky for them, I did not put this info and hurt their online reputation management. Those are poor business decisions and you wonder how many other people will not visit them again.

If you structure a deal right with upsell possibilities, and grab the contact info, it can be very profitable for a business to be on deal sites. When you think in terms of cost per acquisition, it can beat a LOT of advertisement media out there, and it is easily controlled.

The worse part is that the greater majority of the deal shoppers have no loyalty whatsoever, and prefer to wait for another big deal then take the upsells. Businesses that offer personal, hands-on service tend to dislike dealing with the deal shoppers. Emotions then play a real factor in their experience. Even if they would make money, they are not happy with it all. Less personal business models will work better.