Thumbtack, a site that lets people book local services like handymen and tutors, says that Groupon and LivingSocial's valuation of their discounts is way overboard, and sometimes even more expensive than market value.
A Seattle Groupon for handyman services advertised two hours of services for just $79, a discount of more than 64%. However, if the more than 300 people who bought the deal had done some research they would have found that the price is just about average, and actually 20% more expensive than some handyman services in the area, according to Thumbtack.
Thumbtack says of the 57 handymen listed on its own site in Seattle, the average rate per hour is just $42 -- or $82 for two hours of work. According to Groupon, that amount of service should run you $220.
"Offering deals with above-market rates was a more common phenomenon than we expected," Sander Daniels tells LAUNCH via email.
LAUNCH has contacted Groupon and the advertiser of the Seattle Handyman deal for comment. We will update this story if we receive a response.
A LivingSocial spokesperson was unavailable at time of press.
Sander says that Thumbtack did find deals that were below market value from daily deal sites, but says it only took them 30 minutes to find the above market ones they selected to demonstrate the overvaluation in discount.
A Phoenix Groupon on Sept. 15 offered two hours of home cleaning services for $49, at a discount of 67% off the regular price of $150.
But the average rate per hour of more than 126 home cleaning companies in Phoenix using Thumbtack is just $23.50 -- which is actually cheaper than the Groupon deal that more than 500 people purchased for $24.50/hour.
"We think that people buy daily deals in the local service industry because it's easy to buy if it's sitting in your inbox and because they're not aware of other ways to easily find a good deal," Sanders says.
Thumbtack says that Groupon and Livingsocial's deals haven't had any substantial impact on their traffic because there haven't been many deals in the space. Services only makeup 11% of Groupon deals, according to Groupon's S-1.
"People who purchase daily deals do so on impulse - people who find our site are actively looking to hire someone, regardless of whether a deal comes their way," Sanders says. "We guess that the overwhelming majority of local service consumers hire based on need, not impulse."
The San Francisco-based company was founded in 2008 by Marco Zappacosta, Johnathan Swanson and Sander Daniels. The company received more than $1.2M in funding in 2010 from investors Scott & Cyan Banister, Joshua Schachter, Jason Calacanis, Mark Britto, Scott Faber, Mark Goines, Auren Hoffman, Ariel Poler, Ali & Hadi Partovi, Vance Bjorn, Denis Grosz and Yan-David Elrich.
"Pricing is tough to compare in the local services industry because job rates vary dramatically on location, difficulty of job, and various other details," Sander says, "Lots of daily deals are offered on a 'per carpet cleaned', 'per driveway repaved', or other metric that can't be compared with our hourly rate data. We only have data on hourly rates, so we had to pick and choose deals that were priced in terms of an hourly rate."
Full disclosure: Jason Calacanis, the founder and CEO of LAUNCH, is an investor in Thumbtack.
This Aug. 28 Groupon, offered 50% of the regular maid rate of $45/ hour. Thumbtack says the average rate of 62 Chicago maids on Thumbtack is just $20/hour and with the lowest bidding $16/hour.
This Aug. 22 Groupon offered two hours of handyman services for $75 in Houston. The Thumbtack average rate based on its 39 listed handymen: $35/hour with a low of $27.50.
This July 19 LivingSocial deal advertised the interior painting of a 12x12 room in Boston for $150. Thumbtack, which only uses hourly rates contacted five Boston painters for the average time it would take them to paint such a space and their rates, the painters told them about four hours. The average price for a four hour paint job from one of Thumbtacks 34 Boston-based painters, $35/hour for a grand total of $140. The lowest listing was $30/hour.