This round values Living Social at $3.5 billion. What is their intellectual capital? What is their brand equity? What are the barriers to entry? Potential entrants? Current competitors? Power of suppliers? Power of buyers?
Any 0f these can squeeze the profit box dry. In this case the threat is competitors and potential competitors. The buyers cannot collude and neither can the businesses.
Know that the deal sites are not even worried about their brand equity. I know because they run ads by known scammers, port producers like Cole Whittaker who, according to her, hired my girlfriend to do teeth whitening by never paid her. To the best of my knowledge he runs adds on deal sites, flakes on many appointments and pockets the cash after not even paying the temp offices in which he sets up shop. The point is the deal sites do not even plan on establishing brands which is a short term perspective. Deal software can also be bought for a couple hundred bucks so that is no barrier.
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