Groupon’s Stock Plummet Worries Rival LivingSocial

Groupon Inc. stocks continue to swing to a low since the online coupon service went public. Its stock fell to an all-time low, which has caused concern among investors.

This has also got District-based LivingSocial worry, as some analysts believe that Groupon’s slashed shares can have a direct impact on the former’s value when it predictably goes public or tries to raise more capital.

Jordan Rohan, Managing Director at Stifel Nicolaus said that LivingSocial is trying to change analysts’ view and is working hard to show profitability and a different consumer offering.

Offering discounts to users on daily deals online, LivingSocial is a direct competitor of Groupon. The firm tried to prove to be better than its rivals and even hosted one-time events, such as beer festivals and sushi-making classes. It also created a multipurpose activity venue to attract users.

However, LivingSocial revealed at a media day in June, that company gets most of its revenue from its business of offering daily deals to users. It further stated discounted travel getaways to be the sector that supplies in the second largest amount.

Groupon Inc. also provides same services to consumers.

Daniel Kurnos, analyst, Benchmark Capital believes that plunged stocks of Groupon will certainly have an effect on the valuations of LivingSocial as both are similar and in fact Groupon is the biggest of two.

The Chicago-based company, Groupon saw a slow growth rate as expected. However, the firm saw a profit in the most recent quarter. It posted operating income of $46.5 million for the 2Q, which was up from a loss of $101 million during the same period in 2011.

LivingSocial posted a net loss of $93 million during the same quarter, which was better than last year, when the firm saw a loss of $198 million during those three months. The finances were disclosed in a regulatory filing by Amazon, which has a stake of 29 percent in the firm.

LivingSocial executives however, declared that the firm has no immediate plans to go public.

Rohan, MD at Stifel Nicolaus said, “It could change. But right now it doesn’t appear like the market would be receptive to the valuations that would make the investors behind LivingSocial excited about going public.”

LivingSocial however, is reported to go through many challenges in recent weeks.

The company confirmed the news of closing up its business in the Middle East. It started business into some Arab countries after acquiring GoNabIt last June.

Andrew Weinstein, Spokesman of LivingSocial said executives took the decision to shut operations that didn’t lead to profit, after reviewing the firm’s domestic and international markets earlier this year.

The news hit the headlines following the firing of top three executives and nine employees by LivingSocial in July as it plans to reform some of its District-based units.

The company also announced opening up of a customer service call center in Tucson, which has cheaper business and living costs.… Read the rest

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Game Getting Tough for Zynga, Facebook Worries as Stocks Plunge

The surprising second-quarter stumble of Zynga has created questions about the company’s prospects with the social networking site, Facebook that actually makes up a major portion of revenue through gaming. Posting a plunge of $22.8 million for the quarter Wednesday, there have been concerns whether the gaming business can sustain or not. Zynga has seen a decline in the player engagement and enthusiasm for its games in recent months.

Zynga’s shares opened at $3.06 in Thursday trading from a previous close of $5.08 that is far below its Initial Price Offering (IPO) of $10. The company has failed to demonstrate reasonable earnings on the horizon that has left all investors wishing for another game to play.

In an earnings call Wednesday, the Farmville-maker said that delays in the launch of some games mark the reason behind the company’s loss. Zynga, a social gaming giant also admitted that its high-profile acquisition of OMGPop and its “Draw Something” game has yet to pay off. Shortly after release, the game was a number-one but slipped out of the highest downloads lists on Apple’s iTunes and Google’s Play stores.

The company blamed the changes to Facebook’s Web platform for the lost interest as this platform has been directing users to newer games from other publishers.

But analysts have said that Zynga’s recent performance shows that consumers aren’t sold on the idea of buying virtual goods— a trend that could send ripples across the technology industry.

Facebook’s shares also swung into loss due to the drop in Zynga’s shares, with wary investors likely recalling that, at last count, Zynga itself accounted for 12 percent of Facebook’s total revenue.

Facebook posts its first earnings report as a public company Thursday amid concerns that it will also struggle to prove it knows how to make money off its 900 million users — who give their personal information to the site but use its services for free.

With earnings coming after the closing bell, Facebook shares opened at $27.75, down from a previous close of $29.34.… Read the rest

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