Most of the small daily deal startups seem to shutter after a few months, lost in an overly crowded market. Most of the big ones just seem to bleed massive amounts of money.
Groupon's biggest North American rival, LivingSocial, lost a whopping $558 million in 2011, according to Amazon's 10-K filing with the Securities and Exchange Commission. That's a big number, and even bigger when you consider that the company's annual revenue was only $245 million.
As the company gushes losses, it's also hiring like mad: the group buying startup added well over 4,000 employees last year. The bigger you are, the harder you fall.
The company claims to be in growth-mode, rapidly penetrating new markets and acquiring new customers. But consumer loyalty in the space is nil, as studies have proven, and merchants often get a raw deal. With the entire industry's sustainability under constant scrutiny, how long can these companies keep losing money before they call it quits? Or can someone actually innovate a business model where consumer, merchant, and daily deal site all win?