Punch line: Lost $558 million last year on $245 million revenue. Ouch.
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Excerpted from the Washington Business Journal
Amazon, which invested in LivingSocial in late 2010, disclosed limited details of the daily deal company’s 2011 performance in its annual report filed with regulators.
Accounting Note
Accounting rules required that Amazon release Living Social’s essential financial data.
As explained in Amazon’s annual report, LivingSocial is recorded using the “equity method of accounting” – a method used when an investment “gives us the ability to exercise significant influence, but not control, over an investee.”
The threshold for that designation typically runs between 20 percent and 50 percent ownership. Amazon owns 31 percent of LivingSocial.
Under that accounting method, Amazon must include some condensed financial information about LivingSocial in its own financial reports
Even though the data was buried far down in Amazon’s annual report, the numbers quickly found their way into the press and produced a flurry of unwanted headlines
Amazon, which owns a little less than a third of the DC-based daily deal company, laid out LivingSocial’s numbers, showing a $558 million loss last year on $245 million revenue, with operating expenses of $686 million.
Daily deals is a manpower-intensive field crowded with competitors. LivingSocial has about 5,000 employees.
LivingSocial’s informally claims that much of that operating loss was incurred earlier in 2011, and narrowed later in the year as the company scaled back marketing expenses.
Also, part of the loss can be attributed to LivingSocial’s acquisition spree, which was paid for through a mix of cash and stock.
Still, the $558 million loss is much more red ink than LivingSocial observers had expected, and much less revenue.
In April, CEO Tim O’Shaughnessy said his company was on track to book $1 billion in revenue in 2011.
Oops.
Now that’s a markdown for you
Thanks to SMH for feeding the lead…
