LivingSocial

» see livingsocial.com as it lived, on the wayback machine

~ the eulogy ~

livingsocial was a daily-deals company that operated out of washington dc between 2007 and 2017. it sent you one email every morning with a discounted offer for a local restaurant or a regional getaway. for a brief stretch around 2011 it looked like the most credible competitor to groupon, and amazon led a 175 million dollar round into it in december 2010 to make sure of that. by 2013 the company had roughly seventy million registered members in twenty-five countries. the paper valuation hit somewhere between four and six billion dollars depending on which round you used.

it sold to groupon in october 2016. the price was effectively zero, reported in groupon's q4 filing as a non-material acquisition. groupon closed the dc office and laid off everyone who remained. the washington post ran an obituary in february 2017 with the headline "rip livingsocial." the final ninety-five staffers were let go in march of that year. the brand technically still appears as a coupon page on groupon.com, which is its present afterlife.

livingsocial did not have a meaningful turkey presence. the daily-deals model did reach turkey in roughly the same years, through markafoni and grupanya and a handful of smaller sites that have also since died or pivoted. but those were local companies serving istanbul and ankara, not livingsocial branches. for me livingsocial was a name in business news about a category whose local equivalents i never bought anything from either.

~ the dossier ~

~ what it was ~

the pitch was simple. a small team negotiated a half-price coupon with a local business. they sent it out to a city-specific email list. enough people bought it to make the volume worth the discount for the merchant, and livingsocial took a fifty percent cut. groupon ran the same model first and bigger. livingsocial was the friendlier-looking number two with the better experiences vertical, where you could buy a hot-air-balloon ride instead of a sandwich.

at its peak the company had over four thousand employees, most of them in dc with sales offices spread across the us and abroad. the office was famous in dc tech for being one of the first to look like a san francisco startup. there were rumors about catered lunches and a sleep room.

~ what really happened ~

two things went wrong at the same time. the daily-deals model was an arbitrage on a one-time merchant subsidy. once every restaurant in your city had done a livingsocial offer once, there was nothing left to sell to that customer. churn was high on both sides of the marketplace. the second thing was that groupon itself was a dying company. the two leaders in the category were both spending more on customer acquisition than they could earn back, and the public markets noticed groupon's ipo arithmetic by mid-2012.

livingsocial cut its workforce in waves through 2012 and 2014. by 2015 there were under a thousand employees, down from a peak of about forty-five hundred. the october 2016 sale to groupon was the cleanup pass. for the previous several quarters livingsocial had been losing money on operations, and amazon, which still owned a 30 percent stake, wrote the equity down to nothing on its books before the deal closed.

~ what got buried with it ~

the daily-deals era as a whole. between 2010 and 2013 there were dozens of clones in every city, often run by people who had quit big tech companies to start them. by 2015 most of them had either died or been folded into the groupon-livingsocial duopoly. the underlying lesson was that getting people to your inbox cheaply does not equal a durable business, and that fifty percent off is not actually what most consumers want, since nobody wants a coupon for something they would not have bought anyway.

livingsocial is also one of the cleanest examples of the late web-2.0 mistake of confusing valuation with viability. it was worth zero in 2016 not because the technology had failed, but because the underlying transaction was not profitable for anyone in the loop. amazon's 175 million dollar bet ended up as a writeoff. the founders had already cashed out enough secondary that they were fine. everyone else who joined for the equity got a free t-shirt.

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