By Jeffrey Green (@epaymentsguy)
Online voucher and local marketplace provider LivingSocial benefited during the first quarter from the sale of its South Korean business, but the company’s first-quarter revenue was down, despite the early effects of a “strategic refocusing” the company announced last fall.
Net income for the quarter ended March 31 was $177 million, as compared with a net loss of $45 million a year earlier. Reflected in those results is the $260 million sale ($205 million net) of Ticket Monster to Groupon in January. Revenue was $77 million, down 29 percent from $108 million, while operating expenses dropped 8 percent, to $98 million from $107 million.
In 2013, total revenue fell 12 percent to $399 million, due primarily to “reduction in customer acquisition spend,” the company said in January.
During this year’s first quarter, the sale of Ticket Monster in Korea, and the improvement of the LivingSocial cost base, reflected ongoing strategic corporate initiatives designed to refocus the company, the company said last week in its earnings announcement.
In an interview with PYMNTS.com, John Bax, LivingSocial chief financial officer, noted that a lot of changes have gone on internally over the past year alone. Much centers on mobile and digital marketing, which ramped up in late February and early March and isn’t really reflected in the first quarter numbers, he said.
A lot of the work has centered on altering the core product to make it more appealing to consumers and merchants through a more user-friendly process. The market will see much of that come to fruition in the third quarter, Bax said.
“We’re taking the objections merchants have in running offers with us and removing them,” he said. “We’ll keep saying yes until they stop saying no.”
During the quarter, LivingSocial’s new mobile apps for iPhone, iPad, and Android included simplified navigation, geolocation services, improved maps, and enhanced search functionality. The app also supports voucher purchases, storage and redemptions, doing away with paper vouchers.
The period also was the first full quarter of LivingSocial’s Good Deal Guarantee, through which consumers have more time to receive refunds if they change their mind about a purchase. And LivingSocial named Doug Miller as chief revenue officer, where he will focus on helping create demand for local merchants, travel, event partners, national brands, and driving overall engagement.
Internal surveys have shown the return on investment from LivingSocial’s offers has been positive for merchants, but the company hasn’t done a good job bringing that message to merchants, Bax added. In a project dubbed internally as “Glue,” the company is working to make that message clearer with merchants, Bax said.
After the quarter ended, on April 1, LivingSocial sold its Southeast Asia eCommerce business to iBuy Group in a move the company said furthers its strategy of reinvesting and focusing on its strategic growth plan. That sale wasn’t reflected in the Q1 numbers.
“Our businesses have shown significant growth in the emerging eCommerce markets of Thailand, Malaysia, Indonesia, and the Philippines,” Bax said in the sale announcement. “However, we believe that both LivingSocial and our businesses in Southeast Asia would be better served separately, so we began the process of finding a complementary organization.”
Under the agreement, iBuy Group acquired from LivingSocial Ensogo Holdings Ltd. and its subsidiaries for $18.5 million in cash plus assumed liabilities. Ensogo and its subsidiaries include all of LivingSocial’s business operations in Thailand, Malaysia, Indonesia, and the Philippines.
In the PYMNTS.com interview, Bax said the company considers the Korean and Southeast Asian unit sales as “intelligent loss of business,” given they didn’t fit with the company’s overall strategic objectives. LivingSocial is using the proceeds to invest “tens of millions” in digital marketing, especially related to mobile, including the hiring of 25 new programmers in the past 50 days to support the initiative, he said.
“It’s a huge personnel build and development effort around the new products and mobile efforts,” he said. “There’s a lot we’re not quite ready to announce.”