LivingSocial files to raise over $500M; can it overtake Groupon?

versusLivingSocial has played little brother to Groupon when it comes to daily deal aggregators since its origin, but that’s not to say the site is shying away from the competition. VCExperts revealed that LivingSocial has filed to sell approximately $565 million of convertible stock in Series E fundraising – which would bring its valuation to nearly $3 billion. What’s more, The New York Times is reporting that the company raked in $400 million in funding from investors including Amazon and Lightspeed Venture Partners last week.

If Groupon’s own fundraising success is any indication of how the number two discount commerce site will do, we can expect to see LivingSocial take home some serious cash. So why would Groupon’s own record fundraising round of $950 million mean anything about LivingSocial’s own ambitions? Because the company appears to, wisely, be following in Groupon’s footsteps – and possibly even avoiding its mistakes.

At one point it seemed as if nothing could touch Groupon, the golden child responsible for defining this new scheme. It was the first one there, the first one to capitalize on the growing popularity of local, group buying, online commerce, and time-based discounts, and combining them all into a formula that is now being repeated, and repeated, and repeated. LivingSocial has been trailing behind, gaining its own footing and narrowing Groupon’s lead. Here’s how.

Travel

escapesLivingSocial introduced its own designated travel discounts in November, called Escapes. Sure, the entire lethal combination these sites provide is their local draw. At the same time, weekend getaways are a hot ticket item, and one LivingSocial is capitalizing on. The New York Times reports that since Escapes was introduced it “has sold about 200,000 hotel nights,” and brought in nearly $100 million.

Groupon has yet to counter this move, instead sticking with its own localized method. Sure, a weekend at a nearby hotel crops up fairly often, but a weekend in the Caribbean you won’t see (that is, unless you live in the Caribbean).

Marketing

We all remember Groupon’s disastrous Super Bowl ad. The riff on Tibet’s plight was too severe too soon for the young company. You might be ruling the coupon commerce platform, Groupon, but we’re willing to bet that largely male, middle-aged Super Bowl viewers don’t quite get what you’re all about. The company has even cut ties with the firm that created the commercial, and since then has shied away from much advertising.

LivingSocial, on the other hand, has stuck with its marketing campaign since its own (pre)Superbowl commercial. It’s successfully tying itself to an image and a brand – which isn’t to say Groupon hasn’t, but LivingSocial seems to be reaching for a wider audience with continued TV ads.

Strategy

Groupon is going global, that much is clear. The company expanded in Asia this year, in what one LivingSocial investor describes to Forbes as a “land grab.” LivingSocial meanwhile, is focusing on its image and product, like its updated smartphone app that updates deals according to a users’ location.

LivingSocial seems to be more interested in defining itself versus going international – and while it’s too early to say whose strategy will pay off, you have to recognize that Groupon’s expansion has come with its share of hiccups. Still, it’s been tied to IPO rumors for some time now, and regardless of its competition or missteps, it would likely bring in more than twice LivingSocial’s estimated worth.

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