Home > rfd > Comments On RedFlagDeals.com’s Direction and Eventual Decline

Comments On RedFlagDeals.com’s Direction and Eventual Decline

As I promised in a previous blog post and in RFD’s Comments and Suggestions area, it is time for me to post additional comments on the direction of the site, why I think its leadership is failing, and the ultimate decline in the quality of the site. This, if left unchecked, will lead to a deflationary spiral in site traffic and revenues leading to the “eventual decline” to which I’m referring.

Is this eventual decline inevitable? No. But avoiding it will require RFD’s administration to undo much of the damage that’s been done in the last few months.

Let’s look at the big picture.

RFD’s parent company, Yellow Media, is in decline. Their stock price has dropped nearly 99% of its value since its highs of 2011. For the fiscal year ending in Dec 31, 2011, they recorded a net loss of $2.83 billion and a net debt of $1.5 billion, compared to a market cap of about $0.096 billion. To date, the market cap as dropped to about $0.036 billion. I won’t get into the various doubts surrounding Yellow Media’s latest recapitalization plan, but the information is easy to find.

I think this explains a lot of the recent changes on RFD that aim to cut down on “low content” posts and to get everything “spit-shined” to make it look like a valuable and business-like commodity. I think it’s a reasonable hypothesis that RFD is both trying to allay complaints about objectionable posts on the forums, and simultaneously, make RFD look like an attractive asset so it could be sold off for cash.

The approach, like chemotherapy, has a few side effects.

Why is this so important? Consider what people see when they first visit RFD’s Forums. It looks something like this:

Looking more closely at this welcome page, the true Spirit of RFD is revealed. The welcome message says it all:

RedFlagDeals brands itself as Canada’s Largest Bargain Hunting Community. It’s a Community.

And why does a community matter? It matters because RedFlagDeals is about Deals. The posting and discussion of shopping deals is the lifeblood of this community. And what is it that causes deals to be introduced in the community? A small minority of deals actually come via RedFlagDeals and its affiliates. The great majority deals are overwhelmingly posted by random unpaid people. Said randoms are not employees of Yellow Media and have no real employment or financial connection to the company. This involvement of randoms is why RFD has so much more value than the weekly flyers delivered by Canada Post.

This large involvement of random unpaid people is particularly interesting because RedFlagDeals draws much advertisement and referral revenue from all of the web traffic. In fact, most press releases and marketing data related to RFD mentions the millions of unique visitors per month.

So why is it that random people go to the time and effort of writing up and posting deals on RFD? I can think of only two possibilities:

  1. They love RFD so much that they want to drive a lot of traffic to the site, causing money to flow into RFD’s bank accounts.
  2. They want to help other members of the community by informing them about great products and saving them money.

Clearly, the answer is #2, otherwise there would be no actual discussion or commenting permitted in Deal threads. Furthermore, RFD has an integrated “THANKS” feature, showing how the community appreciates the deal-finder’s efforts, again showing the interconnected nature of the community. More importantly, this also shows how the community acts like a team of unpaid interns, doing work that drives real financial benefit into RFD’s pocket. Furthermore, if the community decided one day to simply stop posting hot deals, RFD would quickly shrivel up and die. The reality is that in their business model, RedFlagDeals and Yellow Media depend on a community of unpaid individuals to provide a large amount of material that is ultimately used for RFD’s and YLO’s for-profit financial gain.

This brings us to the reason why I believe RFD is going into a decline. The site administration’s attempts to keep the site “clean” have the side effect of stamping out much of the camaraderie and discussion that arises when people in a community come together to talk about their interests. The presence of heated debates, acrimony, humorous discussions, and clowning around in relation topics that are loaded or controversial are what happens in a large community. That’s reality. It’s what makes people feel connections to each other. These communal connections are the driving forces that cause random people to post Deals so their community friends can benefit.

When all of the fun and camaraderie are stamped out, RFD’s administration is essentially expecting people to act like “employees” that work for free for the benefit of Yellow Media’s bank account. If RFD wants to control its viewership to this extent, then they should also hire a team of paid full-time deal-finders, and only these people should be allowed to post deals. This would give RFD the moral authority to control its community to that extent. Otherwise, RFD’s administration should pay close attention to the old adage: “Don’t s**t where you eat.”

If this cycle continues, the many of the most active community members will slowly fade away due to the lack of a properly functioning community. This will lead to fewer deals from the most active members, thus driving less traffic to the site, causing the community to be even worse, etc. This is why I fear a deflationary spiral. RFD is shooting itself in the wallet.

Reality

I don’t expect the changes to the management of the RFD community to be altered in direction any time soon. RedFlagDeals is part of the Yellow Media group, and that company has certain very specific business goals at this time. Furthermore, the original founder of RedFlagDeals (Derek Szeto) is no longer involved in the site’s administration. I doubt Yellow Media really cares about the long-term direction of the site at this time and is more interested in quick-fixes to make it a sellable asset.

The Administration of RFD is not ignorant, and they probably know exactly what’s going on; I speculate that their hands are tied due to the management direction from YLO. I speculate that the only real recourse against this kind of situation would be for people to stop posting deals en masse. Most likely, the only winner is Derek; RedFlagDeals and its parent company (Clear Sky Media) were acquired for just under CAD $10 Million in preferred share from YPG.

Looking at RedFlagDeals.com, the site has grown to enormous proportions in terms of activity and membership numbers. I expect that the computer hardware and staffing necessary to run it is non-trivial, and as such needs the resources of a real commercial entity to maintain itself. Therefore I wonder if this is really some limiting factor in internet communities: Once you reach a certain size, you have to conform to the standards of a large corporation to receive financial backing consistent with the same. It may be that RedFlagDeals has reached this wall. If that is the case, its Administrators should expect that this will only open the door for more smaller sites to fill the “community-void” that is opening up on RFD.

On Leadership

ReadFlagDeals is suffering from a perceived leadership-void.

A lot of changes are being implemented in the community, much to the chagrin of many members. Changes in websites, business, and life are inevitable, and some people who fancy themselves to be “leaders” fail miserably in successfully bringing change. And that is what’s happening on RedFlagDeals.

RedFlagDeals has a leadership void because there is no perceived overarching direction or vision. True leaders bring their subjects through difficult decisions or transitions because they show that their actions derive from some specific goal or mission statement. (As corny as it sounds, this is why teams and companies make up mission statements.) Great leaders know that they must have the appearance of working under the guidance of some higher power or direction. If RedFlagDeals wants to make whatever changes are necessary without annoying the same people that supply its lifeblood of Hot Deals, its administration needs to show some greater transparency and be more clear with where everything is heading and the overall goal and direction for the site.

That’s my piece. Over and out.

Footnote

This section was originally at the top of this post, but I moved it down here because I think only about 5% of readers would care.

I had delayed in writing this post partially due to an excessively busy work schedule (i.e. real life) and to give RFD’s administration a chance to respond to my comments. Since no response has been received, and some people have already voiced concerns along the lines of what I’m proposing, that’s why I have chosen to post my piece.

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Categories: rfd
  1. JPP
    January 25, 2013 at 2:47 pm

    Funny how you predicted the future in the end of july! I don’t know if you’ve been to RFD lately but they’ve done changes to the site’s login in the last few weeks and now many things are broken. They fix one issue and two new ones pop up. Some lose their time giving infractions to users expressing their discontent instead of trying to fix issues. They removed the Microsoft Account login integration without first thinking of the implications to the users that were using it. In other words I think some interns (I’ve seen plenty at my work as I’m in IT) would do a better job than the people running the site right now. If you do a google search for canadian deals forum RFD is not the first result, but its too bad that the reviews about the other site aren’t much better.

    It’s really too bad for RFD as most of the community was really nice (there are always a few rotten apples in every bunch). I really hope something happens and things get better.

    • January 25, 2013 at 7:15 pm

      @JPP I think it’s a stretch to say I was predicting the future. I hope RFD gets its login problems fixed soon; My own posting has been sparse as of late due to being constantly logged out again on my phone, and other priorities. It is very sad to see a great site like RFD go through these problems. Will they be able to recover despite their parent company? I have no idea.

      Thanks for your comments.

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