Group Buying Hot, LivingSocial Gets $25M More

Late last year Groupon stunned and excited many by announcing $30 million in funding. Today “social commerce” site LivingSocial announced a series B round of $25 million:

LivingSocial, the social commerce leader behind LivingSocial Deals and top Facebook applications Visual Bookshelf and Pick Your Five, today announced that it has completed a $25 million Series B round of venture funding led by U.S. Venture Partners, with Grotech Ventures and Steve Case’s Revolution, LLC participating. With this round of funding, LivingSocial Deals is launching in four additional cities: Chicago, Denver, Raleigh Durham and San Diego, making the program live in 13 markets across the country, growing to dozens of cities by year-end. By signing up for LivingSocial’s free daily online service people are saving an average of 50-70% at their favorite places . . .

The company, which was a social networking effort of sorts, has now reinvented itself effectively with its group-buying effort: LivingSocial Deals.

However these group buying sites are now springing up every other day. All you need is a wordpress blog (essentally) and a telepone to start dialing for dollars. Often the discounts, as the PR copy above indicates, are very steep. What that means in the most extreme cases is that the SMB may break even or even take a loss in exchange for new customers and the hope of lifetime value, depending. In many cases the merchant does make a profit and is able to book revenue ahead of fulfillment.

These channels work very effectively and consumers love them for obvious reasons. But merchants are often ambivalent because of the “costs.”

Enter another site that I just became aware of called SyncFu. According to the email I received, it works in 50+ countries and seeks to empower the merchant directly as a platform:

SyncFu assists sellers, allowing them to offer their selected products on group selling at their web site through an embeddable widget. There are no intermediaries, and no percentage fees charged. The system utilizes micropayments to make reliable pledges / reservations for later purchase after the deadline for signing up expires.

There are no target quantities / total values, as the price of units drops proportionally with each reservation, and all accordingly to the quantity/price relations the seller specified at Cost of making reservations depends on the country/operator as it is made via mobile phone, and is in the range of $1 – $3. After the operator fees, this charged fee is kept by SyncFu for its services, which is insignificant to the total value, does not represent cost for the seller, and for the buyer it is a ‘dissolving’ cost.

After the deadline expires, each reservation holds own discount code, and the seller has the flexibility to choose how to request the full payment of lowest achieved amount. It can be through own web shopping cart, through physical visit, or via email tool . . . 

The only problem is that these group buying sites are marketing vehicles because they aggregate audiences in ways that local merchants would have difficulty doing — unless they’re very savvy and persistent.

4 Responses to “Group Buying Hot, LivingSocial Gets $25M More”

  1. Dejan Strbac Says:

    Thanks for the mention of Greg. We are aware that many SMBs go into these deals due to exposure. As much as it is good for publicity, the model is restricted to local markets, not even on the size of countries, and can’t be applied to digital content and physical goods due to such fees.

    IMHO, that model isn’t sustainable and with all copycats showing up, target audience is just getting smaller and smaller. That’s why we believe the only right place to do group aggregation is on the vendor’s website. It brings in social media in a smart way so that viral spreading of information is in best interest of everyone. However, the widget we’re offering for free is just the tip of the iceberg and is about continuos presence instead of a one time shotgun publicity.

    After we’ve got a critical number of vendors signed up, we basically exist to drive traffic directly to vendors’ web shops where visitors might also find other interesting things. What I am referring to is the real time information we will offer to everyone for free to build apps on top – what is popular and on sale right now, where and for how much – and a link to the vendor. This will also be part of our global market place and search engine.

    As you mentioned, now anyone with a blog may do the business model of livingsocial / Groupon. The only thing that is missing is how to softly lock-in the potential customer. With we offer that, so anyone may bring up a local promotion website in independent commission deal with local vendors. Unofficially, we will soon provide with an open source platform to do that in minutes. That said, LivingSocial and Groupon business models are just about the “featured” deal of the day/week/month.

  2. Greg Sterling Says:

    Thanks Dejan:

    I agree that the copycats are all over the place and there will be a shakeout because everyone cannot succeed — either on the consumer side or the SMB side.

  3. Review Sites Package – Personal Use – BDN « todayshealthyoptions Says:

    […] Group Buying Hot, LivingSocial Gets $25M More « Screenwerk […]

  4. Nir Bar Sade Says:

    Hi Greg
    My name is Nir and I am the new owner of SyncFu
    We have created some changes in business model and added some cool features to merchant’s admin panel
    We no longer take a payment from users in order to join the different deals, it is absolutely free, we only take a commission similar to affiliate from the merchant only on successful deals.
    Nir Bar Sade

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