Deals site LivingSocial cuts 400 jobs worldwide

[Omaha Steve]

Source: AP-Excite

By BARBARA ORTUTAY

NEW YORK (AP) - Online deals company LivingSocial is cutting 400 jobs worldwide, or about 9 percent of its work force, as the deals market continues to face challenges.

LivingSocial spokesman Andrew Weinstein said Thursday that all but a few dozen of the cuts are in the United States. The company's sales force faced the highest number of cuts, while others are in customer service and editorial, the people paid to write up the deals. LivingSocial said it is moving its customer service operations to Tucson, Ariz., from Washington, where it has its headquarters.

Weinstein said the job cuts came as part of a review of LivingSocial's global operations. He said the review was designed to make sure that the company has the resources it needs to invest in areas that are "critical to the future," such as marketing and mobile.

Over the past year or so, online deals have gone from fad to a much-copied business model that's easy to set up but difficult to sustain. LivingSocial is one of the largest of the online deals companies, behind No. 1 Groupon Inc. (GRPN)

FULL story at link.


Read more: http://apnews.excite.com/article/20121129/DA2RRNM82.html

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In this April 29, 2011 photo, Ross Arbes, 24, left, plays ping pong while on break at LivingSocial's offices in Washington. Online deals company LivingSocial announced Thursday, Nov. 29, 2012, it is cutting 400 jobs worldwide, or about 9 percent of its work force, as the deals market continues to face challenges. (AP Photo/Jacquelyn Martin, File)

[PSPS]

1. These "deals" outfits are a sham

LivingSocial, just like Groupon, is nothing more than a pyramid scheme. It's the businesses who sign up that get the shaft.

Remember how WalMart destroyed Vlasic pickles? These outfits work the same way. They sign up businesses who are lacking customers and profits with wild stories about how they'll steer so much business their way. The only problem is that they insist you offer whatever it is that you sell at such a deep discount that, after they take their cut, you lose money. Many businesses get so flooded with these "discount deal" customers that it forces them to close.

Now add in the "creative accounting" used by these "deals" outfits. Their expenses are out of control as can be seen in the picture -- reminiscent of the mid 90's "business model" of bloated staff with nothing else to do with their well-compensated time than play ping pong, foosball, all while feasting in the company-funded "kitchen." Trouble making payroll and no cash in the bank? No problem! Just sing up more businesses and use that cash flow to keep creditors at bay. In other words, these "deals" outfits aren't profitable. They use today's dollars to pay off only what they have to from yesterday's bills. The gap widens until they're exposed as a scam just like Groupon.

[jmowreader]

2. The OTHER big problem these sites have is newspapers

This is an extremely easy market to get into for newspapers because we already know how to sell ads. Our ad staffs can offer Groupon-like deals as part of a complete ad package, the software to run it isn't expensive, and we don't have fancy offices with tennis tables. Living Social and Groupon...well, that's all they got. If people don't want to get their nails done this week, Groupon is screwed - and if you look close at those sites, a large percentage of their deals are for salon services or restaurants.(My paper's offerings are almost all those two things.)

I see a collapse ahead for all those sites; the model is way too easy to duplicate.