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Capital Business
Posted at 06:07 PM ET, 11/28/2012

LivingSocial plans to lay off hundreds in U.S., company sources say

LivingSocial plans to lay off as many as 400 U.S. employees, including some in the District where it is headquartered, according to sources inside the company.

The sources spoke on the condition of anonymity because they were not authorized by the company to discuss the layoffs.

A LivingSocial spokesman declined to comment. The story was reported earlier Wednesday by the Washington Business Journal.

The cuts would represent a sudden U-turn from earlier this year, when the online daily deals venture said it was hiring multiple people each day and was adding new office space every few months in the District. It now has six D.C. offices. As of April, the company had 956 employees in D.C., making it one of the District’s largest private employers, and it had projected having as many as 2,000 employees in District.

Driven by its popular deals, LivingSocial spent millions of investment dollars to acquire competitors and expand globally, but it reported a net loss of $566 million for the third quarter after it wrote down the value of several daily deal firms it acquired last year. It has not yet turned a profit and has since pulled out of some international markets and has sought to diversify its business by selling vacation getaways and everyday consumer goods, with mixed results.

If a large portion of the cuts come in D.C., they could represent the latest in a string of blows to the city’s flagship technology company, one that Mayor Vincent C. Gray (D) considers the centerpiece of an effort to grow a larger technology base in the city.

Concerned that LivingSocial would take its then-aggressive employee growth elsewhere, Mayor Gray and the D.C. Council passed legislation in July approving up to $32.5 million in corporate and real property tax breaks for the company provided it met certain criteria including the hiring of District residents.

Now, not six months later, the prospect of a consolidation seems unlikely. In a phone call Wednesday, David Zipper, director of business development and strategy for the District, emphasized that the government had not provided any incentives to date and would not unless the criteria are met.

In order to take advantage of any of the benefit of the legislation, LivingSocial would need to have a headquarters of at least 200,000 square feet, hire 50 people a year, and have at least 1,000 people employed in D.C., Zipper said: “If either of those criteria are not hit, they can’t claim any benefits in the bill.”

Zipper said he was surprised to learn of the layoffs since LivingSocial had been hiring at such a rapid pace earlier this year. He added that such gyrations are not uncommon for online firms.

“Tech companies can grow really rapidly. Sometimes they shrink and they grow again and other things happen. Even with the layoffs we’ve seen so far they will remain one of the largest private employers in the city and one of the best-known technology brands in the District,” he said.

Jose Sousa, spokesman for Victor L. Hoskins, deputy mayor for planning and economic development, said that it was too early to tell what the effect would be on the company’s effort to consolidate. “We haven’t gotten to that level of discussion yet,” Sousa said.

LivingSocial’s chief executive Tim O’Shaughnessy is the son-in-law of Donald E. Graham, chairman and chief executive of The Washington Post Co.

Capital Business reporter Steven Overly contributed to this article.

Follow Jonathan O’Connell on Twitter: @oconnellpostbiz

By  |  06:07 PM ET, 11/28/2012

Tags:  LivingSocial, daily deals, technology, Vincent C. Gray, D.C. Council

 
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