LivingSocial lost $558 million in 2011

February 1, 2012

LivingSocial, the fast-growing daily deals site headquartered in Washington, lost $558 million on revenue of $245 million in 2011, according to a regulatory filing by Amazon.com, which owns almost a third of the company.

The filing is the first glimpse into the financial workings at privately held LivingSocial, which is less than three years old and is expected to go public this year.

Amazon.com reported the numbers in a note detailing its equity investments because it owns 31 percent of LivingSocial, which is the second-largest business in the daily deals space after Groupon. A LivingSocial spokesman declined to comment.

It’s not surprising for fast-growth companies such as Facebook, Zynga and LinkedIn to incur big losses early in their growth cycle.

LivingSocial has more than 60 million members worldwide in 647 markets across 25 countries. The company has more than 4,900 employees and is one of the biggest growth companies, in terms of the number of people it hires, in the Washington metro area.

It has sold more than 63 million vouchers since it began.

LivingSocial earned $245 million, with operating expenses of $686 million and other expenses of $117 million, leaving the loss of $558 million, according to the filing with the U.S. Securities and Exchange Commission.

A source close to LivingSocial, who was not authorized to speak publicly, said the $558 million includes more than $100 million in non-cash losses from acquisitions and stock compensation. LivingSocial bought several companies in 2011, many of which were purchased with non-cash methods such as stock warrants.

The source also said that the $245 million in revenue is what LivingSocial grossed after merchants in its daily deal space took their share.

The source said LivingSocial took in about $750 million in 2011, but most of that was paid immediately to its merchant partners in its daily deals. That left LivingSocial with $245 million.

Under the popular model, daily deal sites offer online coupons that a customer buys for, let’s say, $20. The daily deal sites and the merchant split the $20 according to an agreement.

The customer can take the coupon to a merchant and redeem the coupon for, let’s say, $40 worth of goods.

LivingSocial is run by co-founder and chief executive Tim O’Shaughnessy, who is a son-in-law of Washington Post Co. chairman Donald E. Graham.

Thomas Heath is a local business reporter and columnist, writing about entrepreneurs and various companies big and small in the Washington Metropolitan area. Previously, he wrote about the business of sports for The Post’s sports section for most of a decade.
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