LivingSocial moves beyond daily deals with takeaway service

Placing take-away orders through smartphones

LivingSocial is diversifying from its core daily deals business with a new food-ordering service that lets users place orders with local restaurants using their smartphones. The firm is launching the service, dubbed ‘Takeout & Delivery’, in the US this week, with plans to roll out to other markets where it is active, such as the UK, in the future. Looking to boost engagement and cement its relationships with partner merchants, the move chimes with comments made by CEO Tim O’Shaughnessy in January that LivingSocial is more than just a daily deals site. This comes as firms such as Groupon increasingly look to alternative revenue sources as fears grow over the long-term sustainability of the daily deals model.  

LivingSocial will be competing with a host of dedicated takeaway apps, such as Seamless.com in the US, as it branches into the new market. Despite the competition, LivingSocial has an advantage due to its existing partnerships with thousands of local businesses. Globally, LivingSocial claims to have 60 million users across 647 markets, opening up a potentially huge customer base for its new service. 

Takeout & Delivery’s new GM, Greg Mazanec says LivingSocial is not charging restaurants to sign up but will take a slice of the revenues they make on orders. The firm will be hoping that the new service will boost its value to merchants, which are the lifeblood of local deals, after reports that 52% of those polled plan to abandon daily offers in the next six months. Interestingly, consumers can register their card details to Takeout & Delivery to pay for orders without being forced to sign up to the firm’s daily deals emails. Whether an indication of the firm’s ambitions for the service as a standalone product or an effort not to alienate users by flooding their inboxes every day, this is further evidence of the firm’s diversification from deals.

Pressure is mounting on LivingSocial to explore new revenue streams, after reports that the firm lost $558 million last year. Allegedly paying out a total of $803 million in expenses in 2011, the firm is drawing comparisons with market leader Groupon, which has been heavily criticised for its spending and is yet to turn a profit. The daily deals space has faced a backlash from critics and analysts in recent months, as the initial hype begins to settle. The number of daily deals sites globally fell by 798 in the second half of 2011 alone, bringing the long-term viability of the market under the spotlight and pointing toward a growing consolidation in the market. 

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