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LivingSocial Loses $26 Million in 3rd Quarter
The company continues to struggle toward profitability as it shifts its business model away from daily deals.
District-based LivingSocial lost another $26 million in the third quarter of 2013, continuing the once-hot online coupon company’s struggle to achieve profitability. The latest quarter in the red comes as LivingSocial has shifted its business away from the daily deals to restaurants, shops, and spas on which it was built and toward longer-term discounts on a wider variety of services.
But the change in strategy hasn’t stopped the bleeding yet. LivingSocial’s losses for the first nine months of 2013 were $107 million, according to Securities and Exchange Commission filings by Amazon, which owns a 31 percent stake.
In the past year, LivingSocial has tried a variety of new business models, including a food delivery service, which flopped. It also scrapped its “experiences” business selling curated day-long excursions. The company has also had to deal with a few other embarrassing moments, such as in April when hackers obtained the personal information of 50 million customers.
LivingSocial is also still trying to live up to its end of a tax incentive deal it signed with the District government last year. The $32.5 million tax break is due to take effect in 2015, but only if the company becomes profitable. The company must also consolidate its headquarters into a single DC office, and employ at least 1,000 people in DC—half of whom must be District residents to fulfill their pact with the city. As of early October, the company had about 600 people in DC, who are still spread across several offices, and fewer than 250 of them actually reside within city limits, the Washington Post reported. LivingSocial has still not staffed back up from last November’s layoffs, which got rid of 10 percent of its global workforce, and 160 DC-based employees.
As LivingSocial racks up another loss and changes up its products, the biggest question might be what exactly the company’s function is. Speaking at an event last week at the startup space 1776, LivingSocial CEO Tim O’Shaughnessy said the company has evolved into a kind of digital advertising agency.
“We’re a marketing platform to drive customers to local and national merchants,” he said. “Our circulation is multiples bigger than the Washington Post’s.” (O’Shaughnessy, incidentally, is former Post owner Donald Graham’s son-in-law.)
But O’Shaughnessy’s comments did not suggest LivingSocial is getting closer to qualifying for its big tax break. “They didn’t do anything wrong,” he said of the employees who were laid off last year. “They’re just not what the business needs.”