Fizzling Daily Deals Hurts Amazon's Bottom Line
In line with the waning of the daily deals craze, Amazon has blamed its poor earnings report on its investment in Living Social. Reporting a net loss of $274 million this quarter, the release notes that includes a $169 million loss "related to our equity-method share of the losses reported by LivingSocial, primarily attributable to its impairment charge of certain assets, including goodwill." Amazon narrowed its loss on Living Social last quarter, it said. But things haven't been looking good for Living Social (or its clone companies) for awhile. In 2011, Living Social lost $558 million. (Amazon invested in the company in 2010, when flash deals sites looked like a viable business model.) Since, businesses have gotten more vocal about how these arrangements don't always work out in their favor.
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Amazon may have pushed the blame on Living Social while talking up its Kindle Fire HD, mentioning it 15 times in the press release. But, Wall Street is still punishing Amazon, with after-hours trading on its stock down around three percent. The daily site may account for more than half of the losses, but the rest came from Amazon's stuff. From the release, it looks like at least part of it has to do with below expectation sales, which came in at $13.81 billion versus the $13.9 billion analyst's predicted.
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