LivingSocial Worth $3 Billion, But Can It Last?

living social

Groupon had better watch its back. In an impressive growth spurt, LivingSocial raised $400 million from investors like Amazon (with whom they brokered the famous $175 million deal earlier this year), Lightspeed Venture Partners, and T. Rowe Price and Institutional Venture Partners, the New York Times reports.

living social

And the site’s two new ventures — a time-sensitive, geo-location app and a separate travel site — are sure to garner them an even higher following and more pronounced brand identity.

The new app, Living Social Instant, works on a hyperlocal and short flash-sale time frame that would allow someone sitting at a park to get a discount on lunch at a nearby cafe. (Right now, this app is only available in D.C., where the company is based). The vacation-deals site, Escapes, has sold about 200,000 hotel nights thus far, with the business now approaching $100 million, the Times reports.

But gaining any ground on the elephant in the room –  the group-buying giant Groupon — will be an uphill battle. Even with a $3 bill valuation, LivingSocial is still far from giving Groupon a run for its money (Groupon is worth $25 billion, more than 5 times as much as LivingSocial). And at 26 million subscribers, LS only has a third of Groupon’s audience.

Still, Living Social CEO Tim O’Shaughnessy remains sunny, announcing plans to double his revenue goal to $1 billion. But all optimism aside, whether or not the group-buying business has much of a future is somewhat in doubt — experts say the trend will eventually plateau as more retailers realize that these group deals convert normal customers to the far less valuable coupon customers.

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