“It’s a free market, but LivingSocial is using Wal-Mart principles against the creative community,” said Michael Clements, founder of ArtJamz, a District-based company that hosts painting parties. “There has got to be another way for them to use their millions than to compete with creative businesses.”
Clements was troubled to learn that for one of the first events at its venue, LivingSocial offered a two-hour painting class, complete with wine, for $29, half the price he typically charges. Adding insult to injury, 3,326 people purchased tickets for the event, about the total number of customers ArtJamz hosted in 2011.
“We don’t have a million-person [e-mail list] like LivingSocial,” Clements said. “They built that list because people wanted access to the merchants at a discount. They run the deals, get money from merchants and something even more valuable: analytics and demographics” to replicate what works on their own.
The complaint surprised Doug Miller, LivingSocial senior vice president for new initiatives, who envisioned the space as a testing — not burial — ground for merchants.
“It’s really designed as a platform to bring local merchants together with members in a new way to create unique experiences,” he said.
Celebrity chef Mike Isabella, Miller noted, used the venue to try out recipes for the Mexican restaurant he plans to open in Georgetown this spring called Bandolero.
“Our space supports area businesses,” Miller said. “We’d like to invite people like ArtJamz, and people in that community, to experience it and discuss ways they can use the platform.”
LivingSocial is led by Tim O’Shaughnessy, who is a son-in-law of The Washington Post Co. chairman Donald E. Graham.
Peter Krasilovsky, an analyst at Chantilly-based BIA/Kelsey, argued that LivingSocial is well within its rights to evolve its business model as it sees fit. The company, he said, is locked in a battle with Groupon for market share and needs a competitive edge.
ArtJamz, Clements noted, is not the only company that could be hurt by LivingSocial. Orange Arrow, No. 68 Project and the Coterie all host conceptual dinner parties that will compete with the company’s restaurant events.
But Hosan Lee, the cultural director of No. 68 in D.C., said she believes “the cream will rise to the top if they organize to educate consumers” on the difference between “mediocrity and what a thoughtfully designed experience should be.” Still, she considers Living Social’s new model a short-term threat to creative companies “living from one client to another.”
“The people looking for authentic experiences will seek out the businesses creating them,” Lee said. “The responsibility lies with the creator to make sure the message gets out, and that’s usually the part they have trouble with. LivingSocial has a huge marketing budget, which is why it’s troubling.”
Cultural maven Philippa Hughes, founder of arts organization Pink Line Project, doesn’t begrudge LivingSocial’s success, but takes issue with it profiting from artists’ initiatives.
“All of these people did these events and made them cool, but then LivingSocial gets to come and replicate them less expensively,” she said. “When some corporation starts doing [creative ventures], it diminishes the value.”