Blood-Sucking Leeches

Another parasite.

Interested in my thoughts on Groupon? You need to read this instead.

Earlier this year, I wrote about one of the many parasitic organizations that earn revenues solely by selling services provided by other people. I call them the parasites of the tour industry because they live off our hard work and require us to compete against ourselves.

The BillToday I was contacted by a similar organization. This one, which I refuse to publicize with a company name or link, gets businesses to offer special deals on goods and services on the organization’s Web site. They sell the deal and then take a “commission for the use of the platform.”

The commission? 40%!

Of course, I didn’t get that information from the caller. She assured me that the service was free. She said she’d send me a link so I could check it out. She said she looked forward to having a conversation with me about it. I wondered: aren’t we having a conversation now?

I had to visit the site, poke around, and discover the commission fine print. Then I called her back. She was surprised — she hadn’t given me her phone number. But I have caller ID, so it wasn’t tough to call back. I asked point blank what the rate was and she said they do a 60/40 split. I’d get 60%.

Let’s do the math. Today’s special offer is 50% off on rock climbing for a Phoenix-area rock climbing “gym.” The price: $8. So the original price must be $16, right? But what are the rock climbing people getting? $4.80 on something they’d normally get $16 for. That’s a 70% discount. Those folks must be pretty desperate for business.

I don’t even need to do the math to know that I can’t work with these people. My margins are far less than 40%. That means that even without a special discount for buyers, I’d lose money on every sale just by paying the commission. I told her not to bother calling me again; I wasn’t interested.

The next time you find a Web site that offers smoking deals on goods and services, take a minute to consider the struggling small business owner on the other end. When you take advantage of one of these offers, you’re not buying directly from the business owner. You’re buying from a middle man who’s taking a piece of the pie. 40% is a huge piece. What’s that business owner going to wind up with?

The crumbs left behind by a blood-sucking leech.