Amazon filing shows $558M loss for LivingSocial in 2011
How much does it cost to bulk up and compete with the likes of Groupon in the daily deals market? Amazon.com's annual Form 10-K filing, made public this morning, reveals detailed financial information about LivingSocial …
Context & Ripple Effects
The disclosure closes a loop that opened in December 2010, when Amazon made a $175M strategic investment in LivingSocial explicitly framed as a counter to the 'Groupoogle' threat. Through 2011 the company kept raising and spending: a Series E authorization of up to $565M in April, an April TechCrunch report pegging its valuation at $2.9B on roughly $50M in monthly revenue, and an early gift-card promotion with Amazon that moved a million cards.
What Amazon's Form 10-K adds today is the other side of that ledger: the scale of losses behind the growth. The figure is getting wide pickup — Business Insider, AllThingsD, VentureBeat and others all ran it within hours — because it puts audited numbers on a private company whose burn rate had only been inferable from fundraising filings.
First-order effects
- LivingSocial's burn rate is now public via Amazon's consolidated filing, forcing the company to defend a $558M annual loss against the revenue trajectory it disclosed to investors in its $2.9B-valuation financials.
- Amazon shareholders now carry visible exposure to the daily deals war, with the loss booked against the returns from the 2010 investment.
Second-order effects
- Groupon, freshly public and itself under scrutiny for deal economics, faces a rival demonstrably willing to lose over half a billion dollars a year to buy share — keeping customer-acquisition subsidies elevated across the category.
- LivingSocial's capital needs sharpen: with a $565M Series E already authorized in 2011, the disclosed loss makes another raise or deeper Amazon involvement the likely next move rather than a path to standalone profitability.
Third-order effects
- If the pattern holds, the daily deals market consolidates around players who can absorb years of losses — strategic parents like Amazon or public-market balance sheets — squeezing out independents who cannot fund equivalent acquisition spend.
- The episode feeds a broader investor reckoning with consumer-internet growth-at-any-cost models, where audited parent-company disclosures start pricing private-market valuations against real unit economics.
The trend: Daily deals is consolidating into a subsidized land-grab where strategic backers like Amazon underwrite losses to contest Groupon's lead.