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UPDATE: LivingSocial IPO NOT Possible In 2013


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Why A LivingSocial IPO Is Possible In 2013

The last time we featured anything about the “daily deals” farm known as LivingSocial we were anticipating one of the biggest Initial Public Offerings (IPOs) that could be on 2013’s IPO Calendar. Since then, LivingSocial has had a volatile journey with it’s most recent complications surfacing at the end of April, when the company was hacked. Venturebeat reported that over 50 million accounts were compromised though executives assure the public that no credit card information was taken. Whether that is the truth or not will be seen in upcoming months.

(Photo credit to: FatWallet.com)

(Photo credit to: FatWallet.com)

Both daily deals titans have had a rough 2012 and early 2013 so far. Andrew Mason, CEO of Groupon recently resigned just as the co-founder of LIvingSocial did in late March 2013. Even with investors pumping money into the struggling company, I think it’s safe to say LivingSocial is still ways away from going public.

Why LivingSocial Will Not Go Public

Before everything began to crumble, LivingSocial was shooting to expand the scope of their business in the upcoming months. There was a glimmer of hope in February 2013, when LivingSocial received another $110 million dollars from investors. Even with this round of funding, daily deals companies like LivingSocial are trying to treat a severed artery with a band-aid. In 2011 LivingSocial saw a loss of $558 million, and in 2012 that number rose to $650 million. There is no way $110 million can cover over a billion dollars worth of losses. At this point, it seems as though investors are looking for a hail mary play to keep the company chugging.

With the departure of one of the co-founders and the ever growing debt, going public at this time would not necessarily benefit the company. They’ve lost over 10% of their workforce and their current valuation is most likely nowhere near the $5.7 billion it was originally valued at in 2011 when they were raising capital.

How Will LivingSocial Recover?

It seems that even with Amazon’s stake in LivingSocial, the company will have to bow out in the upcoming months. The daily deals industry is in itself collapsing, as most consumers are not interested in spending their hard-earned cash on events, activities, and products they feel are forced on them. Rather than providing their consumers with deals they would actually favor and can consistently use, the demographic for daily deals wound up only targeting those who hop from one daily deal to another. The issue with this model is that after a while, the hype and glamor of the service dulls, just as it did with Groupon and LivingSocial. The results from there are losses across the board. This includes the senior executives, investors, and even the merchants who were duped into slashing prices by 50% in addition to handing over a percentage of their profits with either company.

At this point, LivingSocial needs to make a crucial pivot in their strategy. It may even be too late to do that, as their numbers are drastically dwindling. If they can pull off a pivot, it needs to revert back to bootstrap techniques, rather than blowing ridiculous amounts of money for worthless results. They should look into the areas they found the most success in, and identify what made those deals or industries more successful than others. If they can re-purpose their current model for other types of deals that don’t affect merchants in such a negative way, they should be able to gain a second chance at success.

LivingSocial IPO Wrap-Up

In the end, the daily deals industry is a tough one to find success in. What isn’t merely seen as a novelty is misunderstood, and not seen as a pivotal money saving resource. The biggest problem is that this industry is premature, as it focuses on consumers using their smartphones to help them shop. If LivingSocial was to pivot their efforts and looked into their strengths, they maybe able to recover from such a large loss over the last three years. As always though, only time will tell.

What do you think of daily deals sites like LivingSocial and Groupon? Are they relevant? Do you use them? Or do you see them as the latest novelty?

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