Businessmodel of LivingSocial

Customer Segments

The LivingSocial platform, as well as providing a service to its network of merchant partners, is targeted at general consumers. According to the Company’s own information, LivingSocial’s audience predominantly comprises affluent, educated, female consumers. Around 70% of its user base, totalling more than 40 million, is female. Approximately 70% are also aged between 25 and 54, while 56% are reported to earn more than $75,00 per year.

The US represents LivingSocial’s largest market, accounting for just under 86% of the Company’s total web traffic. The UK is the Company’s accounts for the second largest segment of user traffic with 7.3%. followed by Ireland and Canada each with around 2%.

LivingSocial also serves a range of brand marketers and advertising agencies through its various advertising and marketing solutions. The Company lists household names such as Starbucks, Visa, Hyundai, Burger King and Champion among its advertising customers.

Value Propositions

LivingSocial’s value to consumers is that it provides a catalogue of varied products and activities all in one place and targeted by locality. The platform makes it easier for users to discover interesting events and offers that are available nearby, often at discounted prices.

The platform can be accessed from anywhere via web browsers and mobile apps, allowing users to make plans and purchases while on the go.

The Company’s marketplace increases the marketing reach of its merchant partners, ultimately increasing their sales revenue. The Company also claims to increase repeat business and referrals for its partners.

According to LivingSocial’s own information, 70% of its consumers plan to return to businesses discovered through the Company’s marketplace, while 55% refer others to local businesses they have visited.

Channels

The LivingSocial marketplace can be accessed through its mobile and desktop websites at www.livingsocial.com. A separate site for merchants is located at www.merchant.livingsocial.com.

The Company also has mobile apps for iOS and Android, which can be found in the Apple App Store or the Google Play marketplace, as well as on the LivingSocial website.

Customer Relationships

For its consumers, the LivingSocial platform is entirely self-service with users able to browse the Company’s catalogue of products and activities and complete purchases all from the LivingSocial website and apps.

Merchant and affiliate partners are able to apply to become part of the LivingSocial network through the Company’s website, following which they are able to negotiate the details of their partnerships directly with LivingSocial representatives.

Similarly advertising customers are able to negotiate deals directly with the Company. LivingSocial customers receive support from the Company via its help site which hosts user guides and FAQs.

The Company also interacts with its customers via its Facebook, Twitter, Pinterest, Instagram and Google+ accounts.

Key Activities

LivingSocial is a technology company that develops and operates an online marketplace that enables users to discover, share and purchase locally-sourced experiences, activities and products.

The Company sells products from third-party merchants across a variety of categories, including from bars and restaurants, events and activities organisers, sports and fitness facilities, health and beauty boutiques, and travel and tour operators.

LivingSocial also provides a range of advertising solutions to major national and international brands, including site-wide advertisements and amplifier advertisements.

Key Partners

LivingSocial manages a network of merchant partners that contribute the products, activities and experiences sold through the Company’s online marketplace. These partners primarily comprise small, local businesses such as restaurants, bars, hotels, travel and tour operators, craft shops and independent retailers.

Merchant partners are not charged any upfront fees, with LivingSocial instead taking a commission on sales made through its online marketplace.

Among LivingSocial’s merchant partners are local restaurants such as the Motor Bar and Restaurant in Milwaukee and the Edge Bar and Restaurant in Denver, local attractions like the Maryland Science Centre and the Day Block Brewing Company in Minneapolis, and national operators such as Delta Airlines.

The Company also operates an affiliate partner program for blogs and websites, through which it provides audience specific daily deals.

Key Resources

LivingSocial’s key resources are its software platform, its IT infrastructure, its network of merchant partners and its personnel. The Company has two patent applications filed with the US Patent and Trademark Office, both of which are titled ‘Ranking interactions between users on the internet’.

Cost Structure

LivingSocial incurs costs relating to the development and operation of its online marketplace, the maintenance of its IT infrastructure, the retention of its personnel and the management of its partnerships.

LivingSocial recently laid off around 280 employees in a bid to reduce costs. These layoffs accounted for between 50% and 60% of the Company’s workforce, which now numbers 200 to 225 employees. LivingSocial has reportedly cut almost 900 jobs since Thakar took over as Chief Executive Officer in 2014.

The Company also operates a network of regional offices which accrue costs in the form of rent and utilities.

Revenue Streams

LivingSocial generates revenue primarily through the sale of vouchers, products and experiences listed on its website. For each sale the Company takes a commission, described by the Company as a marketing fee. The size of these commissions varies from deal to deal, with marketing fee thresholds negotiated with sales representatives directly.

Comments from LivingSocial customers across the internet cite commission rates of between 20% and 50%, with the average rate appearing to be around 30% to 35% of each sale. Merchants receive their share of revenue generated by their products once LivingSocial has deducted its marketing fee. For fiscal year 2014 the Company generated a total of $231 million.

LivingSocial’s secondary revenue stream is advertising. The Company provides a range of advertising solutions to brand marketers and advertising agencies that are negotiated on a deal-by-deal basis.