The Competition Between LivingSocial and Groupon

LivingSocial

LivingSocial is an online marketplace that allows its users to buy and share things to do in their city. In 2013 LivingSocial has about 70 million members around the world. Tim O’Shaughnessy, LivingSocial CEO, said that”We’re the connection tissue between merchants and customers, and that manifests itself in different ways. We think we can redefine how people are interacting with another.”

One of the four cofounders of the company, O’Shaughnessy graduated from Georgetown University’s McDonough School of Business in 2014 and joined Revolution Health afterward. He left Revolution Health in 2007 and started a new business, “Hungry Machine”, which is a popular viral app name “Visual Bookshelf” that allowed users to share book reviews with friends. Due to the success of “Visual Bookshelf”, O’Shaughnessy saw the opportunity of leveraging user data.

Groupon

Groupon is a Chicago-based group buying website that offers daily deep-discount deals to local business. Andrew Mason started Groupon in Chicago in November 2008, which was nine months ahead LivingSocial. It was the fastest company in history to reach $500 million in annual sales. Groupon grew from 140 employees in 2009 to more than 7,000 in spring 2011 and could rely on more than $950 million in private equity financing.

Editor’s Note:

Groupon and LivingSocial have similar websites, and allied deal prices. Groupon CEO Andrew Mason recently said on CNBC that his company was “many many multiples” bigger than its nearest competitor. He claimed that he was very confident that Groupon was generating “more than 3” times as much revenue as LivingSocial.

The graph below shows that for both companies the largest section of their members are 34-44 years old. However, Groupon has advantage over LivingSocial among younger customers from 12-17, 18-24, and 25-34. I think the future opportunity for LivingSocial is to increase awareness among young people. In order to achieve that LivingSocial has to communicate with young people on platforms where they are active and in the way that they prefer.

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