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LivingSocial Defers IPO

Posted on Tuesday, Dec 6th 2011

According to Yippit data, this September daily deals player LivingSocial grew faster than the market leader, Groupon. Groupon’s market share of the U.S. daily deals market slipped to 54% in September from 57% a month ago. During the same period, LivingSocial’s share climbed from 19% to 22%. Growth is partly attributed to the $10 million LivingSocial’s Whole Foods deal in which LivingSocial sold $20 vouchers at the cost of $10 each.

LivingSocial’s Financials
Despite strong growth, where Groupon has finally launched an IPO, LivingSocial has decided to go slow. They are evaluating a $200 million funding round, pegging their valuation at close to $6 billion. Earlier this summer, LivingSocial was talking about a $1 billion IPO but decided to put it on hold because of  the volatile market.

LivingSocial’s financials are still largely unknown. Reports estimate the LivingSocial has more than 46 million members. In September of this year, their gross revenues in North America grew 32% over the previous month to $59.3 million. The company is targeting an annual revenue run rate of $1 billion this year.

LivingSocial’s Market Reach Expands
As part of their market expansion, LivingSocial recently launched services in 20 additional cities in the U.S. and also went live in one more town in Ontario, Canada. With that addition, LivingSocial is now available in 608 markets worldwide. They also expanded the number of markets being covered by LivingSocial Families, which is now available in 189 markets across the country.

Also, LivingSocial ventured beyond the Internet and is now vying for customers over the airwaves. The company recently signed a deal with Clear Channel to broadcast their deals to listeners of Clear Channel’s 500 radio channels spread across 90 American cities. The move is said to target 80 million listeners weekly.

LivingSocial Increases Offerings
LivingSocial also continued to add the nature of services offered on their website. They are now evaluating food delivery as one of the categories offered on discount. Launched initially in Washington D.C. as part of LivingSocial Instant, members can order food for delivery from select restaurants. The company is also taking this service upscale by working out a “Room Service” offering, a “premium White Glove” service, that will deliver prix-fixe meals to members from some of the top restaurants.

Yippit estimates the daily deal industry to have grown 12% in September to $266.6 million gross revenues. A month ago, the industry reported a 9% growth rate. Overall, the market is said to be on an annual run rate of $3.2 billion. Between them, LivingSocial and Groupon account for more than three fourths of this market. LivingSocial’s current growth plans will help them not only attract more customers but also, the company hopes, improve the quality of deals offered on their website.

The Daily Deals business model is still making investors queasy, and until more details are available about LivingSocial’s financials – margins, churn, etc. – it would be hard to gauge how this plays out. For now, it seems, they can get away with a $6B valuation for the impending funding round. Since the P&L numbers are not available, it is hard to assess whether this is justified or more hype.

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