The daily-deals biz ain't what it used to be. Wait, scratch that. It is what it's always been: a lousy business. Just ask Amazon.com (NAS: AMZN) , which invested in daily dealer LivingSocial back in December 2010.
The e-tailer holds a minority stake in LivingSocial and has disclosed various figures since investing in the company on its performance. For example, in Amazon's 10-K filed in February, it said LivingSocial had 2011 revenue of $245 million and $686 million in operating expenses, leading to a net loss of $558 million. At the time, Amazon had a 31% stake, so only part of that loss carried over onto Amazon's books.
In the most recently filed 10-Q for its first-quarter earnings, Amazon disclosed that LivingSocial generated Q1 2012 revenue of $110 million, a 168% change from last year. Operating expenses added up to $202 million, resulting in a $92 million operating loss. LivingSocial was able to book a net gain on the quarter, thanks to recognizing "non-operating, non-cash gains on previously held equity positions in companies that LivingSocial acquired during the quarter."
As far as actual operations go, though, it's red ink galore. Daily-deal kingpin Groupon's (NAS: GRPN) figures paint the same picture -- if you even believe its math, that is. Its own 10-K (which includes the most recent round of revisions) showed a full-year operating loss of $233.4 million on $1.6 billion in revenue.
Groupon has fallen spectacularly from what I'd consider the most overhyped IPO of 2011. Groupon's tangential relation to social media was enough to send its IPO valuation up to a stupid $13 billion. Its market cap is just $7 billion today, still higher than the $6 billion that Google (NAS: GOOG) offered it so long ago.
It's mind-boggling that Google and Microsoft (NAS: MSFT) even want in this space. Google Offers and MSN Offers are now on the scene, presumably ready to give away some money like everyone else.
At the time this article was published Fool contributor Evan Niu owns shares of Amazon.com, but he holds no other position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Amazon.com, Google, and Microsoft. Motley Fool newsletter services have recommended buying shares of Microsoft, Google, and Amazon.com and creating a bull call spread position in Microsoft. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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