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LivingSocial expected to lay off 400 in U.S. (bizjournals.com)
41 points by bonzoesc 1697 days ago | hide | past | web | 43 comments | favorite

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.

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

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.

>Too much space (why all those meeting rooms?) and too many employees, probably, but it's hardly Ion Storm.

Keep in mind that space in DC is anything but cheap [1][2] and LS has some prime locations.

1: http://www.businessnewsdaily.com/2855-most-expensive-commerc...

2: http://www.inc.com/news/articles/2010/10/washington-dc-rents...

The giant screen was my first real "huh" moment, but also: rock walls really aren't cheap, nor is that office space, or the multiple stainless steel appliances.

It's not that I think this money was mis-spent -- at best those things might have been able to pay for the salaries of only a few employees -- it's that, taken together, it seems to be a sign of a company that might be distracted where its resources are concerned.

Or maybe they just got really good deals on everything. :-)

The sheer number of Herman Miller SAYL chairs and iMacs is unbelievable, not to mention the sheer number of employees.

Is Living Social even profitable?

Edit: To answer my own question, a $558 million loss last year: http://www.bizjournals.com/washington/news/2012/02/01/regula...

DC office space has to be expensive, they can only build up 7 or so stories by law (nothing can be taller than the Treasury building).

The part about the Treasury building is a common misconception! It's actually related to the size of the street in front of the building: http://www.welovedc.com/2009/05/19/dc-mythbusting-the-height...

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.

> a nice office makes workers happier

I agree, but there's always going to be a 'good enough' point somewhere between drab-gray-walls-office-park and million-dollar-renovation. When I see startups do this I see them pushing too far to the right end of the bell curve.

Some startups really come off like 'new money' people: buying lavish top-of-the-line-equipment with the same mindset as someone who buys $500 flip-flops because they saw Jennifer Aniston wearing them.

I'd much rather see experienced people that know when to invest in something and when something is 'good enough' over someone bragging about their 50+ retro arcade room.

> Providing free food means they are less likely to leave the office

This bothers me to a point that I am less likely to consider a company that offers free food. I look at these 'perks' as "Oh hey, we'd prefer if you would stay and work through lunch, also, why not just stay and work through dinner! We're having Pasta tonight! Breakfast anyone???" Nooooo Thankyou.

"Oh hey, we'd prefer if you would stay and work through lunch"

While some offices might be like that, not all are. I have a cafeteria in my office and I'm very glad for it- it saves me having to go out in the rain to get lunch. It has a separate seating area so it's not like you're expected to be typing while you eat.

Just because you eat in the office and/or at your desk doesn't mean that you're necessarily working. I've worked places where lunch time would consist of people browsing the news on their computers or just kicking back with the people around them while they ate.

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

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.

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).

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

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

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.

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


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..."

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."

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.

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

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.

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.

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.

I think small businesses have always been hungry for more customers, so I believe the dynamic is something slightly different.

I think the Groupon space was basically a big many-sided bubble. Consumers loved the discounts and the urgency of it. Businesses loved the pitch, and the big response was spectacular compared with regular coupons. Investors loved the large user bases and the crazy growth. Groupon loved the high margins and the ability to make the books look great. And media had some great stories to sell.

But I don't think there was much real value there. Many businesses didn't really see long-term benefit from running daily deals. The traffic was large, but fickle.

The only reason this got so big was that Groupon deals had relatively long feedback loops, so it took businesses a while to learn that there were better marketing options. And there were plenty of businesses for Groupon's massive sales team to burn through before their reputation started to wear thin.

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

It's flawed as an experiment in reaching people through new media because the price points are unsustainable. If you're offering a product or service that's at least marginally interesting at 70% off as a reward for booking through a certain channel, then some portion of the population is going to book through that channel no matter how cumbersome it is.

In other words, if the deal is compelling enough, the channel doesn't really matter.

What we're seeing is small businesses wising up to the fact that no, they're not going to get enough increased sales to account for the loss leading groupon. So they're moving back to the traditional 10-20% off 'deals', and the deal sites are taking a bath in the process.

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.

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.

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

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.

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.

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.

I don't think you're the norm. I've read several articles where small business owners say that most people only come for the deal, get nothing else, and don't come back. It's a similar mentality that couponers have.

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

Because they all copy each other

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.

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

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

Yes, I agree that it is an excellent idea.

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.

But now so aptly named.


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