Comments on LivingSocial tax deal needs stronger hiring requirements to grow a tech hub in DC - Greater Greater Washington

Comment by Rain17

Thu, 14 Jun 2012 19:34:41 EDT

I suspect that Living Social may not be around in five years. I read that it lost $580 million last year. I buy vouchers from them all the time for restaurants and vacations.

But I thought about it further. The Living Social business model may not be viable long term. I booked a vacation with them. The guy from the travel agency said his company was losing money by running the deal, but hoped to get repeat business. He hoped people would come back and buy vacation packages from his agency at full price.

Here is the problem, though. If I want to go on another trip I'll just wait for a Living Social deal unless that first company was downright excellent beyond my wildest dreams. I'll go to a different agency that is running a deal. I'll go to a different restaurant running a deal.

From the perspective of the business running the deals I'm not sure the economics are there for them to come ahead through advertising at Living Social. I'm not sure they'll get enough repeat business to justify the expense of losing money through Living Social promotions.

Comment by Phil

Thu, 14 Jun 2012 16:48:38 EDT

Also, don't forget that Livingsocial lost over $500 million last year. That's right, more than half a billion in losses for a company that has never seen a profit. Sound sustainable to you?

Even if half of that is "book" losses from stock grants and such, that's still a really damning number. This is a textbook bubble firm, eventually the dumb money will run out for them and they will implode.

Comment by Kolohe

Thu, 14 Jun 2012 14:41:53 EDT

How about no corporate welfare at all?

Comment by Kate W.

Thu, 14 Jun 2012 13:57:36 EDT

Ugh. This kind of thing is why outside very special circumstances (like redeveloping a specific depressed area) a locality should establish a fair tax rate, regulatory processes that are clear and not overly burdensome, and generally be a nice place to live/work.

Comment by worthing

Thu, 14 Jun 2012 13:36:19 EDT

This deal is remarkable. Living Social could actually fire every DC employee of theirs, never hire another, and still see $9 million in income tax credits and $10 million in property tax credits.

Also, I'm with everyone else who says LS is really stretching the definition of a tech firm. Is Dunkin Donuts a tech firm because they email me about how, this week, I can buy one pound of coffee and get another free?

Comment by JustMe

Thu, 14 Jun 2012 13:17:11 EDT

First of all, if you want to do commerce, DC is not your place. What we should be doing is lobbying the federal government to locate more offices here in the city, rather than bribing companies to come here to do stuff that is considered fairly suspicious by most of the DC government along with many of the members of the community.

Next, Living Social isn't even worthwhile for this-- it's the kind of company that just doesn't have a lot of employees and likely never will. By its nature, Living Social's employees must be geographically dispersed, and a niche software/social networking company is never going to need a lot of software developers in the first place.

Comment by Kyle W

Thu, 14 Jun 2012 13:12:54 EDT

@MLD

Fair enough. I agree. Most manager type people at a company like NG are going to live in MD or VA. Regardless, bringing a new company to DC is nearly always a good thing.

Comment by MLD

Thu, 14 Jun 2012 13:03:58 EDT

Both of those companies would have brought a lot of 100k jobs, the kinds of jobs every city wants.

Unless you're a city who can't collect income tax on people who don't live in your city.

We should be trying to attract companies that have worker demographics that favor central city living. Not saying this deal in particular is good, but at least LivingSocial is one of those companies.

Comment by Kyle W

Thu, 14 Jun 2012 12:51:58 EDT

@Freebies

I am unsure of the specifics regarding either VW or NG, but if those are true, then totally agree, those were both huge mistakes. Both of those companies would have brought a lot of 100k jobs, the kinds of jobs every city wants.

As far as LS, I see them being around for a while. Further, the people with millions of dollars, see them being around for a while, hence why the continue to pump cash into them.

Comment by Michael Hamilton

Thu, 14 Jun 2012 12:27:22 EDT

^This is pretty stupid, too. We shouldn't be bribing companies to move here. We could simply stop making DC office space expensive on purpose by allowing building heights/density to increase to levels set by the market.

Comment by freebies

Thu, 14 Jun 2012 12:10:47 EDT

Ignoring for a second the debate on whether Living Social will even be around in a few years (I doubt it), it irks me that DC is laying out the fancy red carpet, gold leaf china and the crystal decanters for a completely unproven company while systematically and historically ignoring much better options in the past.

I mean, DC lost bids for Northrup Grumman because it wouldn’t match or exceed the 22 million they were given, lost the bid to get VW’s Headquarters to FFX because we wouldn’t match or exceed the paltry 6 million FFX gave them. I could go on for awhile.

These companies have business models proven by the decades and decades they’ve been in business…have proven billions a year in profits whose employees are all high earning, highly educated white collar folks that we need in the District.

Nooo…instead we hand over the keys to the treasury for a glorified coupon circular that employs a bunch of relatively low paying 32-45K/yr “marketing associates”, half of the 1000 in the DC office, don’t even live in the District.

Comment by oboe

Thu, 14 Jun 2012 12:02:39 EDT

What benefit is this deal supposed to confer anyway? DC has a very specific unemployment problem: the unemployment rate is very high among unskilled laborers. Among college-educated workforce, we probably have the lowest unemployment rate in the country.

How exactly are you going to incentivize a tech startup to hire any meaningful number of the folks that actually need jobs? Does anyone actually think LivingSocial is going to be hiring large numbers of poor folks east of the river? I just don't see it.

Comment by Phil

Thu, 14 Jun 2012 11:32:34 EDT

Why are we wasting our time and money on a company that will go bust in 2 years anyway?

Comment by @SamuelMoore

Thu, 14 Jun 2012 11:31:59 EDT

@Spookiness, LivingSocial isn't even a marketing firm, it's essentially an accounts receivable factoring firm, aka it's a short term pay-day-esque loan company...

Great piece on Groupon, the company LivingSocial is trying to become: http://blog.agrawals.org/2012/03/31/why-groupon-is-poised-for-collapse-an-update/

Comment by andrew

Thu, 14 Jun 2012 11:20:15 EDT

Jeez, Mike. If you hate it so much here, maybe it's time to move to a place that suits your personal interests better.

A lot of us actually do like DC.

Comment by Jasper

Thu, 14 Jun 2012 11:18:20 EDT

@ Michael HAmilton:+1 Exactly.

Comment by spookiness

Thu, 14 Jun 2012 10:53:26 EDT

1) I'll save DC the trouble and just flush all that money down the toilet for you.
2) Living Social is not a tech company, its a marketing company.
3) In 5 years nobody will remember Living Social.

Comment by Michael Hamilton

Thu, 14 Jun 2012 10:47:11 EDT

This policy of giving millions of dollars to rich people is absolutely retarded. It isn't a legitimate use of public funds, and it won't cause real growth.

DC is a terrible city with an awful climate and even worse people. It's expensive, and companies only come here because of the massive outlays of federal cash.

If you want people to come here to engage in actual commerce then we should take steps to make it more affordable, like taking away power from the NIMBYs and planners.