Groupon Living Social Purchase
Back when the economy was slowing down, local deal sites such as Groupon and Living Social were all the rage. In fact, these types of deals were so popular that companies like Amazon and Google got into the game for awhile as did local news stations and just about everyone else. They all quickly learned it was hard to make money doing it and one by one they exited.
Still, the biggest two sites Groupon and Living Social survived and lived on. Living Social was heavily invested in by Amazon, but that wasn’t enough to make the company soar. In fact, back in 2012 Amazon valued the company at over $1 Billion, whereas by the end of 2014 the valuation was only $242 million. A huge drop.
Following Groupon’s disappointing earnings announcement today where they announced a 3rd quarter loss of $38 million or 7 cents a share, the company also entered an agreement to buy Living Social. The purchase price wasn’t disclosed, but the company said it is “not material” which hints at a very low price.
You can find more details in this Wall Street Journal article. What are your thoughts? Will this consolidation be bad for the daily deal market or has that space already dried up?
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Not a surprise they lost money….Groupon sends me a 20% deal pretty much every day….I would think that is pretty close to their profit margin on these deals. But I use it all the time. Getting $40 worth of Pizza this weekend for $15!
Apple better be watching this. Groupon and Living Social are great examples of the Blockbuster Effect and Apple will follow. Early one hit wonder with no consistent future innovation.
Entrepreneurs have a motto: “Innovate or Die”. Simple as that.
I actually use Groupon all the time. On top of its good prices and occasionally great sales, it tends to pay generous portal commissions– even when paying with a Groupon GC (which you can buy for 5x or % off). One recent score: this Feb, I got two nights in a $350 hotel room for ~$140 once all discounts were taken into account.