Tag Archives: Living Social

Living Social Wins a $110 Million Lifeline

Living Social has won a lifeline from some of its existing investors today with a new infusion of $110 Million. The new cash lets the #2 deals company, which has been 31 percent owned by Amazon, proceed after sustaining very large, unsustainable losses. (It isn’t clear whether Amazon participated in the new raise).

The new investment suggests that the investors aren’t ready to toss in the towel yet on an investment once valued at $4.5 Billion. There is, in fact, a lot for Living Social to grow on. Despite the bad press that has accumulated in the space – including a recent round of layoffs – Living Social has been experiencing revenue growth, with a 32 percent increase in 4Q 2012 over 3Q 2012.

The new cash will allow the company to continue its efforts to get to profitability and outgrow its original daily deal business model. Newer lines of business include national deals; curated travel packages and classes; goods; mobile “instant” offers”; and small business services, including loyalty and engagement programs.

Living Social has done especially well with national deals, for instance, and now has a steady base of national offers that it runs. It has also invested heavily in online food ordering services.

For us, the two questions are: how much time does it have before the investors lose patience? And is the company positioned well against newer entrants in the promotions space such as American Express, Google, (and yes…Amazon). It is certainly one local’s biggest bets.

Living Social SVP of National Sales Mitch Spolan, a longtime industry sales leader, is a featured speaker at Leading in Local in Boston March 18-20.

Living Social’s Experience Center to Debut


Following in the footsteps of major brands such as Apple, Nike, Harley Davidson and ESPN, Living Social is now seeking to enhance its core brand via a retail “experience” center where book clubs, cooking classes, painting classes and performances can all take place.

The effort follows a trial of a Living Social membership program with built in discounts and perks, a la Amazon Prime. Amazon, which owns 31 percent of Living Social, has been developing drop off sites and is rumored to be contemplating its own stores.

As reported in The Washington Post, Living Social has paid $3 million to renovate 918 F Street, a six story building near the hot new retail area of The Verizon Center and a few blocks from its headquarters. As the article recounts, “There’s an industrial-grade kitchen for temporary “pop-up” restaurants. In a cooking classroom, high-definition, flat-screen monitors connected to motion-sensor cameras give an over-the-shoulder view of a chef at work. Another area could host intimate music sessions, and “flex” rooms will host everything from yoga classes to book lectures.”

To us, the center is a natural extension of Living Social Adventures, in which Living Social acts as the host and promoter for experiences that can combine an outing, a meal and entertainment. One question is whether the cost can be paid back — $3 million appears to be the cost of the building. The extensive renovations may bring the cost higher. A second question is whether the experience center can be replicated in other markets.

The center opens Feb. 16 with a $119 Mexican dinner — not cheap — by celebrity chef Mike Isabella. The meal is a warm-up for a new DC restaurant Isabella is launching the spring. Living Social told the Post that the idea is to extend its focus on lifestyle branding and move away from being known as a coupon company. The term it uses is “scarce experiential.”

Given the focus on classes, Living Social’s tie-in with Amazon, and Amazon’s purchase of TeachStreet, it’s surprising that Amazon isn’t leveraging Teach Street’s relationships with independent teachers. Instead, it has closed down the service.

Filing: Living Social Lost $558 Million in 2011

Living Social, in a battle with Groupon and other deal providers to gain (and keep) market share, lost an eye popping $558 million beyond its $245 Million in net earnings, according to a regulatory filing by Amazon.com, which owns 31 percent of the company. The filing was written about in today’s Washington Post.

The Post article notes that Living Social has 4,900 employees, and claims more than 60 million members worldwide in 647 markets across 25 countries. Its vouchers grossed $750 million.

Here are the accounting details. Its vouchers grossed $750 million, giving Living Social net earnings of $245 million. It had operating expenses of $686 million. It also had other expenses associated with various acquisitions and stock compensation of $117 million, resulting in the $558 million loss.

In our view, companies such as Living Social (and Zynga and Groupon et al) aren’t really tied to earning immediate profits. The gamble is whether their massive spending leads to a solid foundation for growth –and profits– going forward.

The Amazon Influence: Living Social Beta Tests Premium Membership Program

Amazon’s a sleeper bet to really shake up local commerce . But what does that look like? For sure, we see the pieces being assembled…the focus on Amazon Stores, the $175 million Living Social Investment, the Kindle Fire rollout, the expansion of Amazon Prime to include access to a range of content, the build up of Amazon Transactions. But it isn’t totally clear – perhaps not to Amazon, either.

To us, we’re looking at local being organically integrated into general commerce, rather than ghettoized. But we keep returning to Living Social. And to the Prime membership model. Today, we see it more clearly.

As he was checking out a Blue Nile Cyber Monday deal on Living Social, Washington Business Journal reporter Bill Flook uncovered a possible new direction: a premium Living Social membership model being branded as “Living Social Plus Beta.”

For $20 a month, members would receive $25 in Deal Bucks and for the first time, a chance to break into some expired deals (“priority access to closed deals”).

For Living Social, the membership opportunity is clear: they can guarantee at least one purchase a month from well- heeled consumers (Blue Nile is a diamond site). Deal a day participants currently purchase about four deals a year. Moreover, while they are giving away $5 of credits a month, the actual cost is much less since Living Social only needs to come up with the commission amount before the discount.

What’s interesting to us is that Living Social might be going in this direction, and that it’s points and Rewards program that it recently announced with Next Jump isn’t part of the equation. Maybe they are hedging their bets.

Will premium memberships be the new “first class” for consumers, and especially, local consumers? If that’s the case, it has great ramifications for sites not only like Living Social and the deals space, but Amazon, and Angie’s List, too. We’ll see how much it catches on in 2012.

Reassessing Groupon Prior to Its IPO


Image Source: Mashable

Groupon’s greatly reduced IPO is apparently set to take place on Friday, November 4 in an environment much less friendly than originally envisioned last spring.

The bloom has come off for a number of reasons. Groupon has almost no barriers to entry and has had to contend with dozens and dozens of copy cats –apparently 600 at the peak. The glut of services has led to consumer and merchant overload (including lower commissions in some cases), and perhaps fatigue.

The result is that “the fastest growing company ever” appears to have slowed down and perhaps even declined in its core daily deals business, per Yipit Data.

Groupon’s evident slow-down may have helped the company run-thru two short-lived COOs — a very unusual situation prior to an IPO. The unorthodox distribution of its last round of funding to its initial investors also appeared to signal an internal lack of confidence in the company, greed, or both.

The same could be said for the unusual accounting method in the initial S1 leading to the IPO, which sought to downplay the company’s marketing costs in the U.S. and especially, abroad. These have, in part, caused the company to be heavily-in-the-red.

At the same time, new tools and platform products that would extend Groupon’s relationships with SMBs, specifically GrouponNow instant deals, which are mobile-oriented, have had slow ramp-ups. They’ve only had a nominal impact on the bottom line.

Again, per Yipit Data, Groupon Now resulted in less than $1 million in net revenue from May to September – although results will be bolstered now that the product is offered in 25 markets and achieves greater penetration. Other new products such as Groupon Goods, Groupon Live and Groupon Getaways have had promising results, but are not yet strong enough to bet the company’s future.

Groupon’s troubles have not been suffered in isolation. They’ve had a trickle down effect on other Deals Companies. Most notably, BuyWithMe, the #3 or #4 player in the space, was unable to raise money in the wake of Groupon’s problems, and has now apparently been forced to sell at a fire sale price to Gilt Groupe, which may now grab its technology, lists and some of its sales force – even though GiltCity currently operates as a slightly different “flash sales” site. Groupon’s problems have also apparently caused Living Social, the #2 player, to put off its own IPO plans.

Is it all bad for Groupon and the Deals space? Of course not. Groupon continues to have a basically sound business – in the last quarter, it cut off most of its marketing dollars with little apparent impact on its business. This is what we’d expect. Groupon is not a new movie, and it doesn’t need to be constantly marketed.

Groupon also continues to leads the deals segment in virtually every market it is in. Its product lineup is also increasingly promising. At the same time, we see validation in the model by the major investments in the deals space being made by Google, AT&T and Amazon (but not Facebook or Yelp).

In our view, the big money may have been nice for the early investors – although they found their own path to getting paid back. Strategically, the $25 billion valuation was largely a yoke around Groupon’s neck. At a sharply reduced valuation of perhaps $12 billion – still twice the $6 billion offered by Google last winter — the company will now have a chance to grow its set of tools and platforms more organically…and to a certain extent, in its own sweet time.

Living Social Buys South Korea’s Ticket Monster

Groupon got a flying jump investing in overseas properties that have basically cloned its daily deal concept and set up local operations. International now accounts for 54 percent of Groupon’s revenues, according to the S-1 it filed with the SEC in preparation for its IPO.

Living Social has not been as aggressive, mostly operating in Australia and New Zealand. But it also recently purchased Ensogo, which has operations in Thailand, the Philippines and Indonesia (where it operates under the “DealKeren” brand.

Today, Living Social announced a deal to acquire TicketMonster, the largest daily deal site in South Korea. “TMon,” as it is called locally, is one of more than 500 online daily deal providers in South Korea, but has about 45 percent of the market with a mixture of local deals and manufactured goods. It has more than 600 employees and earned more than $95 million in revenue in the first half of 2011. The site was launched in May 2010 and has grown 48 percent per month for the past 15 months.

In an interview with Kara Swisher at All Things D, American-educated CEO and founder Daniel Shin, 25, who was previously with a display ad company purchased by Google, said that Korea differs from the U.S. in terms of its heavy usage of ecommerce and especially location based services. That emphasis will fit in well with Living Social’s recent focus on Living Social Walk-In Deals (and possibly, with Amazon, which has pumped $175 million into Living Social and is starting its own daily service).

Local services remain at the core, but “it is more than just restaurants,” said Shin. He noted that the site has 60 deals a day and is now set to expand into other parts of Asia. Earlier this year, Ticket Monster acquired Malaysia’s Everyday.com.my, a social shopping site.

Groupon’s Mihir Shah at Where 2.0: Tech Unit ‘Deeply Integrated’

Chicago-based Groupon is pushing hard in Silicon Valley to build a major tech presence on the back of Mobility, a mobile services firm purchased last year. One piece of evidence: a billboard on the 101 touting the company as a place to work.

At Where 2.0 today in Santa Clara, VP and GM Mihir Shah said the company has put together “a really large team” in Palo Alto from the product and tech perspective. “It is very integrated with everything else. We are not just some outpost in the Valley.”

Shah says that mobile is especially critical to Groupon’s development. “We’ll have a mobile app across all platforms,” he said. “Over the next few years, we are focusing on how to build the product from the bottom up.”

A hit out of the box for the mobile team has been a bar code scanning app for merchants, which allows consumers to bring their phones to stores without printing out a Groupon. “ A lot of merchants are getting very tech savvy very fast,” says Shah.

Looking forward, Shah says that Groupon will use mobile for instant deals, which are ideally suited for mobile. He says Groupon will typically show 3-4 restaurant deals for lunch, for instance. Instant deals enable merchants to really control their own destiny, offering deals on the fly for down times, for instance.

The big thing from a corporate point of view is such an offer gives Groupon broad coverage it could never get from just offering one or two deals a day. “The big thing is scale,” he says “Now you have coverage.”

Groupon of course , does not have the space to itself. Last week, Living Social launched in Instant deals in Washington DC with 31,000 takers.

Another area that Groupon may be looking at is the secondary market for Groupons that aren’t being used. “Off shoots (of the main Groupon product) will spring up. We’ll look at whether they they make sense for us.”