LivingSocial Top-line Accelerates, Up 15% in Q1
Last Thursday, Amazon’s quarterly filing revealed that LivingSocial grew 170% over the first quarter in 2011. Annual growth for the #2 player is not surprising given industry’s rapid expansion last year – the bigger question is the company’s recent performance as investors have begun to question the sustainability of the overall industry.
New data from our March 2012 Industry Report shows LivingSocial’s North American gross billings are accelerating – up 15% in Q1 2012 from Q4 2011, after an increase of only 6% the previous quarter.
This trend is even more apparent when taking a closer look over the last six months.
Excluding January, when the overall industry experienced a sizeable seasonality dip, LivingSocial’s rate of growth had steadily climbed to 21% in February and then held relatively steady at 17% in March.
LivingSocial Escapes leads performance
LivingSocial Escapes, the company’s travel product, continues to represent an increasing proportion of the LivingSocial’s North American business.
Escapes grew 31% in Q1 2012 to $38 million in gross billings from $29 million in gross billings in Q4 2011. Escapes now contributes 20% of LivingSocial’s North American gross billings, up from 17% and 13% in Q4 2011 and Q3 2011, respectively.
While the Local / National Deals segment is representing a decreasing proportion of overall gross billings, it, too, continues to grow healthily. In Q1, the Local / National Deals segment increased 12% from Q4 – this was spurred by a strong March, where it spiked 19% from February.
Increasing deals offered while maintaining billings per deal
LivingSocial’s improving performance comes as it significantly ramps up the number of deals it is offering. This change in strategy is visible directly on LivingSocial’s site – consumers are no longer showed just a featured deal, but also more than a dozen available deals, depending on the city.
LivingSocial now defaults users to viewing all of the day’s available deals
In Q1, the number of deals LivingSocial offered increased 15% from Q4 2011 to over 21,000 in North America. This is after the number of deals offered increased 21% from Q3 2011 to Q4 2011.
Despite these steady and significant increases in LivingSocial’s number of deals offered, gross billings per deal have not been adversely impacted. Gross billings per deal were more or less flat from Q4 2011 to Q1 2012.
Essentially, LivingSocial has been able to show its subscribers more deals and have them respond by spending at similar rates, and more overall. While this is a battle of diminishing returns, there isn’t a sign of a slowdown just yet.
New LivingSocial Products
Both Groupon and LivingSocial have launched dozens of new product initiatives over the last couple of years, and while some clearly haven’t gained traction, LivingSocial appears to be investing heavily in two:
- 918 F Street: LivingSocial created an events and experiences center in Washington DC to host its own curated offerings. Though there are clearly many fundamental questions with the economics and scaling of such an offering, LivingSocial wants to be able to offer the best merchants in Washington DC opportunities to host supply-unconstrained experiences.
- Takeout and Delivery: Delving into the space where Seamless and GrubHub currently play, LivingSocial is offering its own Takeout and Delivery product to replace its Instant Deals product.
The original daily deal product was created to spur consumer demand for merchants to address wasted inventory. These two newer products apparently have been created to help top merchants address relatively fixed supply constraints (retail locations, tables, etc.). 918 F provides the supply a merchant would need to offer its ideal experience. Similarly, Takeout and Delivery eliminates the constraints of fixed supply altogether.
Ecommerce goods offers potential upside
Despite the potential of these newer products, LivingSocial has yet to roll out a dedicated consumer goods product in North America. The introduction of consumer products to daily deals has fueled not only much of the industry’s international growth, but of Groupon’s North American growth – Groupon Goods already represents over 10% of Groupon’s total North American business.
Growth in LivingSocial’s core business, as well as the prospects of additional product lines, paints a brighter picture for the daily deal industry’s #2 player, and, potentially, the industry as a whole.
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Unaiz Kabani manages Yipit Data, which provides historical offer analysis and competitive intelligence to the daily deal industry and investors.