Groupon clone LivingSocial just raised a terrifying $400 million in a funding round, half of which will go to the investors smart enough to get in early on this total knockoff coupon site. This comes just months after Groupon raised, like, a billion dollars in their own funding round. Is this even remotely sustainable?
These coupon-as-advertising sites are bit like LivingSocial's "have lunch for $1" deal that 30,000 people snapped up today: eye-catching, irresistible, and alluring—but not something that really fits into a productive business model for anyone other than the coupon sites themselves. We've already explored the downside of Groupon for its frustrated editorial employees and for some of the businesses that sign on before fully thinking through the perils of extreme couponing. And there's at least one more stakeholder who's not too satisfied with the coupon business: the people who actually have to convince businesses to sign on in the first place.
We admit we hadn't even thought of the ad people's feelings! But we received an email from an ad sales veteran who'd interviewed at LivingSocial, and pointed out that the coupon business has a built in flaw if you're an advertising salesperson who's trying to, you know, build a decent career:
In my chat with Living Social — they offer you a minimum type wage base of around $40K - and you're expected to close on about 20 deals per month. I asked if they had repeat business or long term client relationships — and of course they didn't. They're all about offering a new deal each day — so once you land an account — that's it - you go on to the next one. I can't imagine that any of these places have a stable sales force. I think they just get a bunch of people in there to try to break deals and then churn them on a regular basis. I also think that if you do come up with something that has potential - they probably take it away as a house account... The writers are not the only ones being exploited by this business model and the "new economy".
Haha, instead of cultivating clients and things like that, ad sales people are faced with the prospect of endless cold calls every day, forever and ever, until they die! We'd be interested to hear from any more ad sales people who've worked in these places—we have a suspicion that it's the type of job with a lot of turnover, as people look to jump somewhere more stable as soon as they get the chance. Not only is a steady cycle of repeat business hard to come by when businesses are forced to take significant financial hits every time they use your service; but you, the consumer, demand an ever-rotating cast of coupons to sate your relentless boredom. New, always new.
The point is: the coupon business is fraught with pitfalls. Unless you're an investor, right about now. But like all internet businesses that get insanely popular in a short amount of time, that is sure to change as well.