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Comment by prawn | Hacker News Reader

This article made me think about two things:

  - did they raise money before they had a prototype/MVP?
  - do group-buying sites ever loss-lead (e.g., pay merchants to offer extra-special deals) to attract early users?

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The product was already live in Sydney before they raised money. They quickly expanded to other cities after raising.

I've participated as a business in one in Toronto. They took 10% after being launched for 2 months (this was 1.5 years ago). Now industry standard is 50% of the revenues the agency keeps.

It is my understanding that initially they waive or significantly reduce their fees to find some key "launch" deals.

Now that I think about it, overly special deals may create an unreasonable expectation in the future.

I have some exposure to this industry and subsidies do happen. It's written off as a customer acquisition cost.

So when you see $20 of Amazon coupon being sold for $10 and wonder how on earth it makes sense for anyone (except the customer, of course) - the deal is most likely being subsidised. Hot deal, creates word of mouth, brings in new business, works better than any other form of advertising for immediately converting visitors into customers.

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