In recent months, LivingSocial has moved away from the model that brought the company its initial success: serving up discounts to spas, restaurants, boutiques and other businesses via daily e-mails. Instead, customers can now access a larger pool of deals on its Web site at any time.
Executives hope that the strategy shift will result in more sales and, ultimately, more revenue. The shift, which began last month, has not yet had an effect on the company’s bottom line, said the person familiar with LivingSocial finances, who was not authorized to speak publicly.
The continued losses were “anticipated, and we made great changes to the platform and we’re feeling like we’re in good shape,” the person said. “We’re going to see more impact down the road. . . . There is innovation on the way.”
LivingSocial has sought new sources of income since its once-booming daily deals business started to wane last year. The company has dabbled in everything from online food ordering to rafting trips to live concerts, but creating revenue streams that can sustain a global corporation has proven to be a challenge.
The company recorded a net loss of $50 million during the first three months of the year, followed by a net loss of $31 million in the second quarter. (LivingSocial turned a net profit during those quarters last year because of several acquisitions, but those profits evaporated when the value of those companies declined.)
LivingSocial appears to be on the right track, including moving away from its reliance on its daily deals business, said Peter Krasilovsky, an analyst at BIA/Kelsey. “We’re looking at a more stable company that may be finding its way out of the hole.”
LivingSocial is privately held, but its finances are disclosed in quarterly earnings reports from Amazon.com, which owns 31 percent of the deals company. (Amazon founder Jeffrey P. Bezos recently purchased The Washington Post and its affiliated publications.)
Chief executive Tim O’Shaughnessy previously told LivingSocial employees that the company would turn a profit during the first half of this year, but executives said those efforts were thwarted by a cybersecurity breach in April.
In the incident, hackers gained access to the personal information of 50 million subscribers — though not their credit card numbers — forcing them all to reset their passwords. Some simply did not return to the site, resulting in a doubt-digit drop in revenue in May.
“We did a lot of very aggressive efforts in the month or two after the breach and got some really good fruits from those efforts. And we continue to try and reengage and get customers back,” O’Shaughnessy said in an interview last month.
But the company’s woes began long before hackers got into its data centers.
LivingSocial posted a net loss of $650 million in 2012, partly because of the declining value of overseas companies it acquired in its drive for global expansion. It ultimately shuttered several of those outposts, including its operations in the Middle East.
LivingSocial also trimmed its global workforce by 400 in November, including cutting 160 jobs from its Washington headquarters. Some of those positions, such as customer service representatives, were transferred to parts of the country where the cost of living is lower.
“At the time, you heard [O’Shaughnessy] say we’re investing less in some areas and investing more in other areas,”Jake Maas, senior vice president of product and operations, said in an interview last month.
The company has plans to hire “a couple hundred employees,” Maas said, including some in Washington and, more drastically, at call centers nationwide.
“I think you’re seeing [hiring in] some of the areas that we’re investing in, that we’re excited about, that we think are going to drive growth,” he said.