x Abu Dhabi, UAESaturday 29 July 2017

US internet deals giant LivingSocial to pull out of Middle East

The daily deals company looks to pull out of the Middle East amid intense competition in the daily deals market.

Intense competition has prompted LivingSocial to look for buyers for its regional operation. Jacquelyn Martin / AP Photo
Intense competition has prompted LivingSocial to look for buyers for its regional operation. Jacquelyn Martin / AP Photo

LivingSocial is planning to pull out of the Middle East just one year after entering the market through the acquisition of a homegrown player.

The daily deals giant, based in the United States and one of the world's largest after Groupon, is considering selling its business in the region amid intense competition from rival sites.

LivingSocial is looking to sell its subscriber base in the UAE, Egypt and Lebanon, according to sources with knowledge of the negotiations who wished to remain anonymous.

In an email seen by The National, LivingSocial laid out the financials of its Middle East operations ahead of a possible sale.

Daily deals sites typically sell discount vouchers for goods and local services and email offers daily to subscribers.

LivingSocial is looking to sell its subscriber base, which is said to number about 750,000 recipients, with a deadline set for this month, according to informed sources.

The company is believed to be in talks with potential buyers within the Middle East.

It is as yet unclear what may happen to LivingSocial's staff based in the region, thought to number about 90, should a sale go ahead.

The Washington-headquartered LivingSocial entered the Middle East market last year through the acquisition of the regional deals site GoNabit for an undisclosed sum.

Competition among daily deals sites intensified with more than 20 group-buying websites competing for business.

"If you look at the top two to three brands in the daily discounted deals industry, it is clear that they are all struggling to remain profitable in most of their markets globally," said Tarek Sultani, a director in the Middle East for Landor Associates, a brand consulting firm.

"Of course, there have been a lot of copycats and competition but if the leading brands can not find a way to succeed then the issue runs deeper than a marketing or operations issue, it brings in to question the fundamentals of the business model."

Mr Sultani added many customers who had bought from group-buying websites had not been satisfied with their experiences and a lot of participating suppliers had not seen a positive impact on their business.

Groupon was subject to a barrage of complaints this year in the UAE for poor customer service and it changed its chief executive twice in a number of months.

"What makes it even more challenging is that these types of business have no assets, no proprietary technology or anything ownable that could see them transform their business and use what's remaining of their brand equity to extend in to a more sustainable profitable business," Mr Sultani added.

Groupon, which launched in the region early last year, claimed in May it had 1.6 million subscribers to its daily emails.

The rival site Cobone said it had a subscriber base of 1.5 million customers in the Middle East and the website was handling traffic of 100,000 visits per day. Cobone, which was founded in Dubai in 2010, claims to be the biggest operator in the market by sales.

Daily deals websites said this year the Dubai Department of Economic Development (DED) was weighing a plan to regulate the industry in the emirate after rapid growth in subscribers over the past two years.

Both Groupon and Cobone said they had been in discussions with the DED over a framework of rules covering the advertising and marketing of promotions.

LivingSocial's possible exit from the Middle East comes as it continues to record losses globally. The company, which is part-owned by Amazon.com, narrowed its global loss to US$93 million (Dh341.6m) in the second quarter of this year. It posted revenues of $138m during the period compared with $59m a year earlier.

LivingSocial declined to comment on a possible exit of the market. "We never comment on rumour or speculation," said Dan Stuart, the managing director for the Middle East at LivingSocial.

rjones@thenational.ae

bflanagan@thenational.ae