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LivingSocial cuts 400 workers as rival Groupon weighs CEO's fate

November 29, 2012|Tiffany Hsu
  • LivingSocial laid off 400 workers Thursday.
LivingSocial laid off 400 workers Thursday. (LivingSocial Facebook )

Daily deals site and Groupon competitor LivingSocial cut 9% of its workforce Thursday, laying off 400 employees as it evaluates its recent “hypergrowth,” a spokesman said.

Though several dozen of the employees worked in LivingSocial’s international offices, most of the downsizing happened domestically, said spokesman Andrew Weinstein. Most of the slashed positions were in sales and customer service as the company shifts resources from its Washington, D.C., base to a new call center in Tucson.

In Arizona, LivingSocial plans to hire more than 100 positions to staff the new facility, Weinstein said.  The company currently has about 4,500 employees.

The move came the same day Groupon’s board members are reportedly debating whether Chief Executive Andrew Mason should keep his post. On Wednesday, Mason publicly defended the struggling company, which has seen its stock price plunge more than 80% since going public barely a year ago, against reports of mismanagement and deal fatigue.

But what ails Groupon is not LivingSocial’s problem, Weinstein said.

Instead, executives “recently took a step back to review the company’s operations to make sure the cost structure was appropriate for what we wanted to do in 2013 and beyond,” he said. “We still think there’s significant potential for this space to grow.”

Quiz: What set the Internet on fire in 2012?

After two years of “hypergrowth,” LivingSocial is hoping to invest more in marketing and mobile initiatives, Weinstein said. The company has more than 70 million members worldwide.

LivingSocial, which is private, said it brought in $124 million in revenue in its third quarter, nearly double the year-earlier figure. In a memo to employees, the company said that September was the first period in its history with positive cash flow.

But, which owns roughly 30% of LivingSocial, said it took a $169-million charge related to its $175-million investment in the daily deals site in 2010.

The cuts don’t bode well for any initial public offering LivingSocial may be considering, according to Sam Hamadeh, chief executive of research firm PrivCo. Besides, he said, there’s “not even any venture capital interested.”


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