Perhaps I'm missing something here -- people criticize group deal sites for taking too much of the money in a deal (50% of the revenue). The marginal cost for LivingSocial on this is 0... why aren't they making tons of money? Where has the near $1 billion dollars gone?
You're assuming it costs LivingSocial nothing to enlist a new business willing to offer a deal. I'm sure this is a huge cost for them, especially considering this is a "land grab" phase where there is fierce competition from other deal sites.
Daily deal sites burn huge amounts of money on online advertising and a massive sales team.
People talk about these companies as if they are tech yet there is such a huge people component that does not scale. Groupon at peak had over 7000 sales people which is insane!
