1. and the Online Coupon Industry Ben Sobczak Jennifer Nevins Joel Samen Mike Rabinovich Sindhu George MK-859: Business Marketing April 23, 2012

2. Redeem Coupon Provide Service Full Payment Coupon Payment Less Cut Coupon Offer Industry Mechanics 2 MerchantsConsumers Broker

3. Merchant Needs 3 Customer needs Awareness Exposure to new customers Awareness Exposure to new customers Price Discrimination Discounts to consumers who value product/service less than ordinary consumers Price Discrimination Discounts to consumers who value product/service less than ordinary consumers Buzz Factor Word of mouth promotion Buzz Factor Word of mouth promotion Manage Inventory and Capacity Unload excess inventory or capacity Manage Inventory and Capacity Unload excess inventory or capacity

4. A Growing Industry 4 Source: Needham & Company LLC worlwide estimates (Jan 2011)

5. Industry is Highly Competitive 5

6. Segment Growth 6

7. Prove Efficacy Generate Long Term Buy In Challenges and Opportunities 7 Challenges Questionable profitability for merchants Existing players are not yet profitable Fraudulent deals Capacity issues for small businesses Opportunities

8. A Market Dominated by Two 8 Increased market share; added 3% of the industry’s revenues from July 2011- August 2011 1 Lost 2% market share over the same period 1 Focuses largely on daily travel deals Combined market share of 22%; numbering more than 400 2 Other online discounters 53% 20% Others 22% 5% Source: “Daily Deal Trends in North America.” Yipit Data. http://www.yipit.com. August, 2011.

9. Value Distribution & Profitability 9 Value Distribution per Deal (typical discount of 50%) Strategic Large base of loyal merchant customers Profit Fixed costs related to merchant and consumer acquisition Revenue Volume of deals Strategic Cannibalization of customer base Profit Conversion rate from first-time to repeat-buyer Revenue Volume of new customers and products Merchant Broker

10. LivingSocial: Playing Catch-up to Groupon 10 53% 20% Others 22% 5% Source: “Daily Deal Trends in North America.” Yipit Data. http://www.yipit.com. August, 2011. “ LivingSocial is the online source for discovering valuable local experiences”. “We help great local businesses grow by introducing them to high-quality new customers, and give merchants the tools to make our members their regulars ”. “ LivingSocial is the online source for discovering valuable local experiences”. “We help great local businesses grow by introducing them to high-quality new customers, and give merchants the tools to make our members their regulars ”. 2 nd largest by market share, revenue Lost 3%-5% market share in 2011 46 million subscribers Industry Position

11. Marketing, Sales and Channel Strategies 11

12. Customer Segments & Product Offerings 12

13. 13 Solution #1: Release Developer API Facebook user growth (in millions) Benefits to LivingSocial Reduced Sales Costs Increased Consumer Reach Tiered Subscription Model for Data Benefits to Merchant More Visibility of Promotions Risks Potential Loss of Control Competitive Response Easy for Competitors to Duplicate

14. 14 Solution #2: Amazon Loyalty Partnership Benefits to LivingSocial Target More Customers Using Amazon Lower Cost Per Acquiring Consumers Benefits to Merchant More Customer Loyalty to LivingSocial Better Analytics on Purchase Patterns Risks Decreased Profitability for LivingSocial Harm Amazon Brand Name Competitive Response Easy for Competitors to Duplicate with Partners Groupon with Expedia and Four Square

15. 15 Solution #3: Analytics to Prove efficacy Do You Plan on Running Another Daily Deal? June, 2011Dec, 20112011 AverageChange % Yes, I plan on it28%32%30%4% Maybe, not sure25%37%31%13% I doubt it36%22%29%-14% Absolutely not11%9%10%-2% Merchant Deal Profitability June, 2011Dec, 20112011 AverageChange % Yes36%35%35.5%-1% No23%19%21%-4% I’m not sure13%31%22%18% Too soon to tell28%15%21.5%-13% Source: “Daily Deal Trends in North America.” Yipit Data. http://www.yipit.com. August, 2011.

16. 16 Coupon Coupon ID Coupon Value Purchase Coupon ID Purchase Total Analytics Coupon ID Purchase Total Coupon Total Profit to Merchant Solution #3: Analytics to Prove efficacy Benefits to LivingSocial Larger, More Loyal Merchant Base Increase Revenue Through Fees Benefits to Merchant Define Profitability of Campaigns Tie Purchases to Consumers – Demographics Propose Key Groups to Target in Future Risks Campaigns Proven to be Unprofitable Privacy Competitive Response Easy for Competitors to Duplicate

17. Implementation ROADMAP 20122012.520132013.52014 Release Developer API Initial development Beta Testing Support and Marketing Extend current analytics capabilities Beta test Ongoing Development Use Analytics to Prove Efficacy Develop Co-branded credit card Software Integration Measure and Control Amazon Loyalty Partnership Sales/Marketing Full Roll Out

18. Living Social in a SEA of RED $1B Cash Infusion Needed Revenue$245M Net Loss$441M COGS20% Available Cash$115M Burn Rate$500M 2011 Financial Situation

19. Benefits of Recommendations Old Projections Break Even in 2014 $1B Injection of Liquidity Necessary New Projections Break Even in 2013 $500m Injection of Liquidity Necessary