LivingSocial expected to lay off 400 in U.S.

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

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.

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..."

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.

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.