Confirmed: LivingSocial Slashes 400 Jobs in Attempt at Profitability

LivingSocial, the second-largest daily deals company in the U.S., has confirmed it is laying off 400 employees, or about 10 percent of its workforce, as it tries to turn a profit.

A spokesman confirmed that employees received the news this morning. Of the 4,500 people on staff, 400 were handed pink slips. Less than half of the layoffs occurred in the company’s Washington, D.C., headquarters, with a couple dozen taking place in its international offices. As Bloomberg previously reported, Eric Eichmann, the company’s president of its international business unit, is also leaving the company.

The layoffs in D.C. were mostly related to customer service, editorial and administrative functions. Many of the customer service jobs will be relocated to Tucson, Az., where the company opened a call center this summer. Additionally, some employees who were located in some of its smaller markets in the U.S. were let go, but none of the company’s regional offices in Seattle or San Francisco were closed.

Unlike Groupon, LivingSocial is a privately held company, so it’s not always clear how it is doing, but since Amazon owns a large stake in the company, some of its financials are disclosed on a quarterly basis. As evidenced by Amazon’s third-quarter earnings in October, it appeared that LivingSocial was in a real slump.

Amazon reported a quarterly net loss of $274 million, or 60 cents a share, including an impairment charge totaling $169 million, or 37 cents a share. In Q3, LivingSocial reported a $565 million operating loss on revenue of $124 million, and revealed operating expenses of $193 million. In a memo obtained by AllThingsD, CEO Tim O’Shaughnessy explained that most of the losses in the quarter involve non-cash items related to acquisitions made last year that are no longer worth as much. What’s more, for the first time since 2009, LivingSocial had positive operating cash flow.

Still, based on the company’s revenue and operating expenses alone, there appears to be a gap of almost $70 million a quarter that the company will have to account for eventually, either through growing revenue or cutting expenses.

The LivingSocial spokesman said that the decision to make the cuts today was part of a global review of the business; the company is looking to come up with a way to free up resources to make investments in marketing and mobile, while also aligning the cost structure with where the business is today. LivingSocial is also cutting back a new takeout and delivery feature that was launched in 20 markets. One area it is not eliminating is its adventures and events business, which organizes one-off events in cities around the country, ranging from river-rafting trips to wreath-making classes.

The layoffs come as LivingSocial’s biggest competitor faces its own issues. Groupon is struggling to continue its rapid growth, and has watched its stock price tumble 80 percent since going public a year ago. Today, Groupon’s CEO Andrew Mason is meeting with the company’s board to determine whether a more seasoned executive is what is needed to run the company going forward.


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