Groupon and LivingSocial Struggle as Daily Deals Lose Popularity

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Groupon executives decided Thursday to keep their CEO, Andrew Mason, but for how long? Amid rapid revenue declines in the daily deal industry, experts wonder if the fad has run its course.

Groupon has been a consumer favorite since its founding in November 2008, with competitors like LivingSocial vying for part of the market. Groupon managed to maintain its edge in the daily deal market by buying up smaller competitor sites, growing quickly and eventually reaching 10,000 employees.

But deal-hunting customers have rapidly lost interest in such business models, leading businesses like Groupon to struggle to stay afloat. Groupon has lost 80 percent of its stock value since its initial public offering in November 2011, and LivingSocial recently let go of 400 employees – downsizing its workforce by about 9 percent.

Groupon CEO Narrowly Evades Firing

During Groupon’s regularly scheduled board meeting Thursday , board members scrutinized CEO Mason’s performance and toyed with the idea of replacing him.

Mason himself seemed confident before the meeting, stating Wednesday that he was still the best person for the job. “If I ever thought I wasn’t the right person for the job, I’d be the first person to fire myself,” he said.

Mason, one of three co-founders of Groupon, remains the company’s CEO – for now.

Speculation continues to surround the company and its future performance in the still-struggling economy. In the third quarter of 2012, Groupon boasted nearly 40 million customers but still lost money. With quarterly sales of $569 million, its net loss totaled $3 million.

The company actually considers this an improvement over the third quarter of 2011. That quarter, it earned $430 million but netted a loss of $54 million.

Despite setbacks, Mason and employees continue to take a lighthearted approach to business. The company announced last week in a press release that it would be holding its third annual “Grouponicus” over the holiday season. Grouponicus, it says, is an ancient celebration and a time to take advantage of great deals. From a business standpoint, this year’s celebration is likely to focus on boosting revenue by offering gift suggestions and by providing discounts on popular gifts.

LivingSocial Combats Losses with Widespread Layoffs

LivingSocial faces similar revenue problems as a result of waning customer interest; the company took a hit of $566 million in the third quarter of 2012.

In a bid to cut administrative costs, the company let go of 400 employees worldwide Thursday, totaling 9 percent of its staff of about 4,500. About 160 of the layoffs occurred at the company’s Washington, D.C., headquarters, since it plans to move the bulk of its customer service from D.C. to Tuscon.

The amount of layoffs equates to the total number of employees LivingSocial had just two years ago, when its payroll included only 450 individuals.

Still, executives remain hopeful that LivingSocial will bounce back from significant losses. CEO Tim O’Shaungessy wrote in a company memo that the company aims to “enter 2013 with a growth strategy” that includes making new hires in various departments.

Photo: Annette Shaff / Shutterstock.com



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