Groupon Buys LivingSocial, a Rival Once Valued at $6 Billion

October 29, 2016 12:23 pm  |  Comments: 0  | Views: 8632

This week Groupon Inc. announced it will acquire LivingSocial, its onetime big rival that was partly owned by Amazon, for an undisclosed sum. The acquisition will unite two of the top names in the once popular daily deal business sector that has recently fallen out of favor with both investors and consumers in recent years. The deal is expected to close in the next month.

Groupon declined to reveal the value of the LivingSocial deal, but said the price wasn’t material to Groupon’s earnings, meaning it is small enough that they do not have to disclose the price.

The transaction marks a quiet exit for LivingSocial, which once competed hard against Groupon for both merchants to list deals for their goods and services, and consumers to buy those offers. Once valued at more than $6 billion during its peak in 2011, the Washington, D.C company raised nearly $1 billion in venture funding since launching in 2007, including a notable $175 million investment from Amazon in 2010. Amazon later stopped investing in the business due to the declining value of the company after consumers and retailers lost enthusiasm for internet coupons.

Daily deals were once considered a potential boon to small and midsize businesses. But the onslaught of emailed deal offers led many consumers and merchants to shy away from the discounts offered by Groupon and LivingSocial.

Prior to this week’s final deal with Groupon, the online coupon service has gone through several rounds of restructuring and layoffs in recent years as it struggled to find a sustainable market for its platform.

Groupon itself has lost much of its luster since the early promise of e-mail deals proved difficult to convert into a large-scale business. Valued at $16.7 billion when it went public in 2011, the Chicago-based company had a market capitalization of $3.02 billion at Wednesday’s close.

Groupon continues to quietly work on rebuilding its business and points to underlying signs that there is a market for its brand and its role in offering customers more offers from merchants local to them.

“Our strategy continues to deliver results with double-digit growth in North America local billings and our highest quarter for customer acquisition in over three years,” said Groupon CEO Rich Williams. “We are looking forward to a strong finish to the year and further progress on our mission to make Groupon a daily habit for consumers.”

Along with the announcement of the LivingSocial acquisition, Groupon said Wednesday it also plans to downsize of its overall business operations from 27 markets to 15 in 2017.

The company hasn’t yet decided whether it will keep the LivingSocial brand name. 

 Sources: TechCrunch, Bloomberg, WSJ


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