Living Social

December 12, 2010 by staff 

Living Social, Just a few years ago, the idea that start-ups offering modest discounts from local businesses are the hottest properties in the tech world would have brought snickers.

Now, Google may be about to buy one of these companies, Groupon Inc., for and about 6 billion, and another, Inc. LivingSocial just bagged a $ 175 million investment from Inc.

Snicker at that. Daily deals are big money and big money is needed to achieve a dominant position.

“The size of the tower is huge because the size of the opportunity is huge,” said Jeremy Liew, managing director of Lightspeed Venture Partners, added, and 8 million of his own around.

Amazon’s investment and the potential acquisition of Groupon by Google, the signals from the explosion of fast and high expectations for a line disconnected from the local industry of small companies who advertise there are three years did not exist.

Liew said the funding was not a reaction to reports of an agreement pending Google-Groupon. Wall Street Journal All Things Digital blog reported Google had earlier offered up to 6 billion to acquire the company.

“We spend time thinking about the future growth of the company, not competing interests,” said Liew.

Lightspeed first invested in the company while in April this year. LivingSocial annualized revenues already increased 10 times since, Liew said. The company says it has 10 million subscribers.

Moreover, it is said LivingSocial booking sales of more than 1 million per day on average and more projects and 500 million in revenue in 2011.

“This is a set of actors scale,” said Liew. “That’s why these two players are the most (business) in this space. With this funding and the funding Groupon before, this is really going to raise the bar for other competitors. ”

LivingSocial was not immediately available for comment.

LivingSocial previously rose about $ 49 million Grotech Ventures, Lightspeed, U.S. Venture Partners, Steve Case and Revolution LLC. Grotech, USVP and the Revolution did not participate in this round.

There are a number of smaller competitors in the area buying group that could be affected by trafficking and potential Groupon LivingSocial. David Wolfe, President of BuyWithMe Inc., a smaller rival, said the value of Amazon and Google is a “validation of the model and the possibility space.”

The buying group space is known for “promotions” for consumers, but the market potential is really on local advertising for small businesses – a market not yet fully developed in line, “said Wolfe. Since small companies can get publicity without paying any cash advance – or consumers pay LivingSocial BuyWithMe, taking a cut before paying small businesses – there is little risk of generating a large amount of new business at he said.

“I think this model is the first true performance model based on online advertising that works for local small businesses,” he said.

BuyWithMe, which received $ 21.5 million from Bain Capital Ventures and Matrix Partners, is in 12 U.S. local markets while LivingSocial is 120 in the United States, Canada, United Kingdom, Ireland and Australia, and Groupon is 300 in 35 countries.

Wolfe says that larger competitors are a threat, but there is still room for growth in space.

“We believe LivingSocial Groupon and only began to increase their penetration into consumer awareness,” he said. “There is still low nationally. We think there is still plenty of room, even if Groupon LivingSocial or were double or triple for us to coexist. ”

Greg Sterling, senioranlyst at Opus Research, said the agreement was LivingSocial reflection “of the frenzy surrounding this whole area of group purchasing. To some extent this is the path of growth and in some extent it is the agreement Groupon Google. ”

“The big question as it moves forward is how this model is sustainable over time,” said Sterling. “I think it will cool to a certain extent.”

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