This news is not surprising to me. I met with an investor earlier this week who told me almost every deal pitched to him these days is in the deal space. Living Social is obviously well funded and gaining ground. Amazon's help is not to be taken lightly. Additionally, there are competitors popping up everywhere, focusing on specific geography, vertical markets and other variations.
Groupon may still win in the long run but this space will not look the same six months from now.
Via Mashable by
Among the glut of daily deal sites that have emerged in Groupon’s wake, none is as serious a competitor to the group-buying site as LivingSocial.
Since its group deals launched in December 2009, the company has garnered a total of $232 million in funding — $175 million of it from Amazon.
That might seem like chump change compared to the $950 million Series D Groupon recently raised or its rumored $25 billion IPO-to-be. But according to this U.S.-market revenue data for both sites, compiled by LivingSocial, it’s been enough to seriously challenge Groupon.
The chart uses information that both group buying sites publish daily: the price of their deals and the number they sell. It seems LivingSocial’s market share has been steadily increasing since 2009. Currently, for every $10 of deals sold on either platform, $4 of them take place at LivingSocial.
If both companies continue to grow at their current rates, LivingSocial’s portion of sales will overtake Groupon’s in January 2012.
Groupon’s decreasing market share in U.S. markets does not necessarily indicate decreasing sales. A leaked internal memo suggests that Groupon’s annual revenue grew from $33 million in 2009 to $760 million in 2010. The change in market share has more to do with the fact that LivingSocial is just growing faster. It had 10 million subscribers in December, and more than 24 million subscribers three months later.
As the company starting with 100% market share in 2008, Groupon really only had one direction to go in once competitors got into the game. Fortunately for them, the entire market is exploding. A recent report from daily deal aggregator Local Offer Network says that group buying will grow 138% to $2.7 billion in 2011.
Whichever way you slice it, however, LivingSocial is a serious competitor. Ben Horowitz, a Groupon investor, recently told The New York Times that he wasn’t worried about new competitors because it would be difficult to build a salesforce comparable to the one at Groupon. Now, as LivingSocial nips at Groupon’s heels, it might be time to reconsider that theory.