In another validation of the suddenly hot collective buying trend, LivingSocial has landed $25m in Series B funding from a group of investors including US Venture Partners and Steve Case’s Revolution, LLC. But even with new money backing several similar companies, it is still unclear if the latest thing in e-commerce will last for long.
LivingSocial got started as developer of Facebook applications and launched the hugely successful Pick 5 app. But the company seems to have developed a real business with it’s LivingSocial Deals, which offers a deep discount at one restaurant or local business each day to users in a dozen cities.
Companies offering daily deals are taking off these days, and the broader trend of collective buying is enjoying a minor renaissance. Groupon, which offers daily deals in 50 or so cities, is the pioneer among the bunch, and received $30m of its own from Accel and New Enterprise Associates late last year.
Though it may be riding coattails, LivingSocial Deals is not a complete Groupon ripoff. Unlike Groupon, there’s no minimum number of people who have to sign up for the deal to kick in, and if three people you refer buy a specific deal, you get that one free.
Coming on the ten year anniversary of the NASDAQ peak, one can’t help but be a bit sceptical of the latest dotcom craze that is attracting big rounds of investment. And while LivingSocial and Groupon may be flying high today, there is no guarantee that their success will endure. As we wrote last month:
Keeping up the quality of the deals will be key to Groupon’s long-term success. Many businesses take a financial hit when they offer a deal through Groupon, and may be disinclined to repeat the offers too often. “The biggest challenge is sustaining the model,” says [Forrester analyst Sucharita Mulpuru]. “Every day needs to be a homerun for them to be a huge success.”
