Amazon’s Stake in LivingSocial Reveals Steep Losses for the Groupon Competitor

LivingSocial’s financial results for the past year were reported by Amazon today, revealing that the company continues to trail behind Groupon by a wide margin.

Amazon, which has a 31 percent stake in the second-largest daily deals company, released the figures as part of its quarterly filing today with the Securities & Exchange Commission.

It said LivingSocial’s 2011 net loss totaled $558 million on revenues of $245 million.

The footnote was first reported by Geekwire’s Todd Bishop this morning.

Chicago-based Groupon, which is the daily-deals leader, will report 2011 results next week. But based on its results for the nine months ended Sept. 30, it is still much larger. In the nine-month period, Groupon recorded a net loss of $238 million on revenues of $1.1 billion.

LivingSocial was always presumed to trail behind Groupon by a fair margin, but now we are able to see exactly how wide the gap is.

However, a source close to LivingSocial said the numbers reported by Amazon are somewhat deceiving. They do not reflect the full year of international results, including the results from some fairly large acquisitions, such as Ticket Monster in South Korea.

The source also said the losses are artificially high because of non-cash expenses, such as stock-based compensation, which soared as the company increased its employee base from 500 to 6,000 in the past year and made 11 acquisitions.

According to the source, the company’s gross bookings, which include both the merchants’ and LivingSocial’s take-home sales, totaled between $750 million and $800 million, not including some foreign investments.

In contrast, Groupon’s gross bookings for the first nine months of 2011 totaled $2.8 billion.

A LivingSocial spokesperson declined to comment.

LivingSocial’s operating expenses, which totaled $686 million for the full year, also reflect steep marketing costs that were incurred early on to acquire thousands of new users.

Groupon was criticized for making those same investments while it was going public.

In the filing, Amazon also revealed that the book value of its 31 percent stake in LivingSocial was set at $208 million, up from the $192 million reported in Amazon’s previous filing.

That implies that the company’s valuation increased over the past year. It is now presumed to be valued at somewhere between $4 billion and $5 billion. Groupon’s public market value is hovering around $13.5 billion.

Despite LivingSocial’s steep losses, the Washington, D.C.-based company is not running out of cash. In December, the company secured $176 million in new funding. The round, which could swell to as much as $400 million over time if new investors join in, is expected to be enough to delay the need for an initial public offering.


Latest Video

View all videos »

Search »

The problem with the Billionaire Savior phase of the newspaper collapse has always been that billionaires don’t tend to like the kind of authority-questioning journalism that upsets the status quo.

— Ryan Chittum, writing in the Columbia Journalism Review about the promise of Pierre Omidyar’s new media venture with Glenn Greenwald