Do you remember the daily deal bubble of just a few years ago? Groupon boomed and had a spectactular public stock offering, and even companies like Amazon and PayPal opened their own copycat sites. Consumers largely lost interest in deals sites as a category, and so did investors, but category leaders Groupon and LivingSocial managed to survive. Now Groupon has acquired its smaller rival for an undisclosed amount, but probably at least 80% off its peak valuation.
The Wall Street Journal reports that LivingSocial was once valued at over $1 billion, and now CEO Rich Williams called the purchase price for the company wasn’t “material,” meaning that it must have been pretty tiny. Groupon itself was valued at $16 billion when it first went public in 2012 during the daily deals boom, but is now worth about $3 billion.
The companies have a similar business model: selling discount vouchers for mostly local businesses, while those businesses actually see very little of the cash from the vouchers.
Businesses and customers alike complained about the fallout from daily coupon deals: businesses found that customers brought in through the site were in general stingy and uninterested in spending over the value of their vouchers, with some already-troubled businesses blaming the sites for their failure or near-failure. Customers sometimes found local businesses that sold stacks of coupons but couldn’t handle the number of customers once they actually showed up in the store.
The acquisition of LivingSocial will close in early November. Groupon hasn’t yet decided whether it will keep the brand alive or simply roll it into its own brand.
Groupon Buys Rival LivingSocial, Reports Another Loss [Wall Street Journal]
by Laura Northrup via Consumerist