Groupon Essay

2751 Words Feb 19th, 2015 12 Pages
In 2009, daily deals firms sprouted up on the digital landscape like eager-to-bloom crocus flowers often seen at this time of year. But more recently a late winter freeze has buzz sawed through one flowery bulb after another, as hundreds of daily deals upstarts have fallen by the wayside because they couldn’t develop in the harshly competitive climate.
Could a big one—LivingSocial—actually be the next to wither away? Sources familiar with the company say they wouldn’t be surprised if the industry’s No. 2 player, trailing only Groupon, was sold to a larger company or liquidated piece by piece by spring 2014. They say LivingSocial has lacked the speed to adjust to a space that’s increasingly becoming more complex.
Even worse for this
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The Chicago-based daily deals firm declined all interview requests for this story.
Indeed, daily deals have been on a cold streak. LivingSocial dismissed 400 employees last November after suffering a net loss of $560 million during Q3 2012. In its Q3 ’12 earnings, Amazon blamed its first net loss in four years on its $169 million write-down for its two-year-old stake in LivingSocial. More recently, LivingSocial endured scrutiny about whether its cash infusion of $110 million was emergency funding or simply another money round for the four-year-old operation.
“You have to ignore the naysayers and focus on the people who matter—our millions of satisfied customers and merchants,” contends LivingSocial rep Andrew Weinstein, responding to the numerous issues his firm is allegedly facing. “After our most recent funding round, we have a significant financial reserve to take advantage of any opportunities, and we are executing against our plans for growth and profitability in 2013.”
Weinstein and his team argue that 80 percent of merchants do repeat LivingSocial deals when contacted by a sales rep—though its self-reporting flies in the face of third-party data available (more on that later). The team is also optimistic about the growth of its newer products, chiefly the Escapes and Fun & Events offers that are designed to build out audiences beyond seekers of discount massages and half-price leg waxes.
“It’s about experiences—not just about the discount,” says Mitch

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