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LivingSocial raises $400M for $3B valuation

Now it needs to use that money to expand

Financial trends and news by Faith Merino
April 5, 2011 | Comments
Short URL: http://vator.tv/n/18ea

Long ranked as the number two daily deal provider at best, and just another Groupon clone at worst, LivingSocial is taking aim at dominating the industry this year. The company has officially raised $400 million of a possible $565 million round. While that's still only half of the more than $1 billion Groupon has raised in the last year, LivingSocial has at least succeeded in setting itself apart as not just another Groupon clone, but a viable competitor. 

For the last year, it seems as though the two daily deal companies have been in some kind of funding war. This time last year, Groupon raised a massive $135 million from DST. A few months later, BAM--LivingSocial raised $183 million from Amazon and Lightspeed Venture Partners, putting its total raised well beyond Groupon's. Not one to be outdone, Groupon went on to raise nearly $1 billion in a round that included over 30 investors in January 2011. 

LivingSocial's $400 million doesn't quite reach the halfway point of Groupon's last round, but it positions LivingSocial to focus more on expansion. It also gives the company a tidy valuation of more than $3 billion. 

Today, the company reaches some 26 million subscribers across 250 markets, compared to the 10 million subscribers in 120 markets it reached at the time of the Amazon investment in December--which means the company's subscriber base and reach have more than doubled in just four months. 

And that kind of growth is what LivingSocial needs to genuinely compete with Groupon at this point. The company has already defined itself as a unique daily deals platform, with several key offerings that set it apart from the sea of clones and even Groupon itself, such as LivingSocial Escapes, a brilliant section of deals on local getaways for those looking for a brief, nearby vacation. (Meanwhile, other vacation deal sites are focusing on the luxury vacations--the $5000 trip to Italy and the uber-expensive posh hotel stays; and who knows, maybe those are paying off, but I'm going to go out on a limb and say that if you happen to have $5000 laying around to throw into an impulse buy on a trip to Italy, you probably aren't desperate for discounts and deals, like I am. I need a cheap vacation.)

Additionally, LivingSocial has debuted its new mobile app Instant Deals, which is currently only operable in Washington DC, but promises big things in the future. Also new to the site: Family Edition, a set of deals just for family friendly activities, such as trips to the zoo and more. 

So now, the only thing holding LivingSocial back is reach. It just doesn't have the same kind of reach that Groupon has, which is keeping it from really dominating the daily deal space. Its subscriber base is not yet a third the size of Groupon's, but that can be remedied by simply expanding--growing its empire to include even more cities, which will help secure its position as the top go-to daily deal site. 

It might've taken a step backward in January when it cut off all daily deal aggregators from its affiliate program, which means sites like Yipit and Dealsurf will no longer be able to include LivingSocial among the deals they aggregate. Rumor had it that LivingSocial didn't want to reinvest its money in the same keywords it was advertising against, but one has to wonder if it also just came down to a simple issue of competition. Are daily deal aggregators now driving so much business that LivingSocial sees them as competitors? Whatever the reason, the company now has a few less routes for reaching subscribers. But Tim O'Shaughnessy is nevertheless confident that the company will double its market this year. 

God speed, LivingSocial. 

Image source: moderndcbusiness.com


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