Social shopping networks, where buyers get discount deals from retailers and wholesalers by buying in collective bulk, have been a work in progress since at least 1998, when Mobshop (get it?) and Mercata were launched.
Twelve years later, investors are once again excited by the topic. Just over a week ago, 18-month-old Groupon was valued at $1 billion in a $135 million funding round led by ubiquitous Russian investment firm DST.
This morning, Washington D.C.-based LivingSocial announced a more modest $14 million round led by Lightspeed Venture Partners, plus previous investors Grotech Ventures, Revolution (former AOL chief Steve Case) and U.S. Venture Partners. LivingSocial also announced plans to expand its local-deal reach from New York and San Francisco into several new geographic areas including, California’s affluent Orange County and increasingly gentrified Portland, Ore.
Why the high valuations? Probably because investors plan to sell their startups to Google, Amazon, Microsoft or Yahoo, all of whom are looking for a bigger cut of any money spent online, and all of whom operate under the presumption that Internet shopping has nowhere to go but up.
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The downside is that after more than a decade the genre has no standout, defining entry that everyone talks about. There’s no Facebook of Shopping. “So many similar offerings makes the whole market confusing for both local businesses and customers,” AllThingsD editor Kara Swisher wrote this morning in an evaluation of LivingSocial’s prospects. Once the current rush to bulk up competing sites is complete, look for the inevitable shakeout.
