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LivingSocial: Fall From Grace

Posted on Monday, Mar 10th 2014

Last year, daily deals market leader, Groupon announced that their CEO and founder would step down from his position. Earlier this year, competitor LivingSocial made a similar announcement with CEO and co-founder Tim O’Shaughnessy announcing his plans to exit from the company. He leaves behind a company still struggling to find a sustainable business model.

LivingSocial’s Financials

Recently, LivingSocial announced their preliminary results for Q4 and fiscal 2013. Revenue for the quarter grew 3% over the year to $94 million. They ended the quarter with an operating EBITDA was a loss of $4 million. For the year, revenue fell 12% to $399 million, but earnings improved as losses narrowed from $109 million a year ago to a loss of $24 million.

During the last quarter, LivingSocial recorded their highest ever revenue day in their history with Cyber Monday sales. Mobile continued to be a big driver of growth and mobile device sales for Black Friday through Cyber Monday period grew 102% over the year.

They do not disclose their membership details any more, but analysts estimate that they have more than 85 million members.

LivingSocial Focuses on Core Business

As part of flailing efforts to deliver improved performance, LivingSocial is reevaluating their offerings portfolio. Recently, they announced their exit from their social event hosting service being offered at the 918 F Street Venue in Washington D.C. LivingSocial believes that operating events at the location was not part of their core strategy and by divesting the building and discontinuing that line of service, they will be able to focus more on the deals side of their business. The last event at the site is being held this month, after which the site will be closed for further events.

Earlier last quarter, they also announced the sale of their South Korean subsidiary, Ticket Monster for an estimated $260 million to Groupon.

LivingSocial’s International Expansion

Meanwhile, LivingSocial has also been expanding the international presence of their core business, especially in the Asia Pacific region. According to a recent report, their Philippines operations have seen strong customer acquisition rates. At the end of last year, LivingSocial Philippines had more than 2.4 million registered users. They are also growing their Australian offerings and last month announced a new digital coupon and loyalty offering for merchants and advertisers in the country. Merchants in Australia will now be able to reach LivingSocial’s marketing base with promotional codes for both online and offline promotions and information on sales.

But none of these plans are working out for LivingSocial. Thankfully though, for now, they seem to have dropped the idea of an IPO. The company has received $935 million in funding from investors including Steve Case, Grotech Ventures, Revolution LLC, US Venture Partners, Lightspeed Venture Partners, Amazon, T. Rowe Price, and J.P. Morgan Securities Inc. But the industry’s troubles coupled with their inefficiencies have resulted in a significant decline in their market valuation. Till a few years ago, their valuation was being pegged in the range of $10-$15 billion. A recent estimate suggests that they are worth $48.4 million.

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