Mixed fortunes at daily deal sites LivingSocial and Groupon. CEO resigns and his letter is here. Both companies were stars....once.

Bizarre changes in fortune at Daily Deal sites LivingSocial and the original, Groupon, all on the same day.

LivingSocial announced today that it has raised 110 million usd in funding from largely, its original investors - so that sounds more like a "cash call" which might indicate difficulties at LivingSocial if it is. 

A memo from CEO Tim O'Shaugnessy (some Irish connection there I would think...) said it was to "build our reserves". And building they need given a loss of 650 million usd in 2012 up from a loss of 499 million the previous year. Over a billion usd in losses in two years.

It cut its staff by 10% (400) at the time with reports in December that it was "running dangerously low of cash". With losses like that, it's not sustainable.

On the other side, Groupon, the 4 year old, daily-deal-market-maker, fired its co-founder Andrew Mason who was also CEO (that's him above with the cat). It came just 24 hours after reporting bad numbers again for Q1 bring a 25% drop in share value. Now down -75% since it floated which 'Forbes' magazine calls 'The Groupon Disgrace' and said "talk about a CEO who no longer has any credibility with investors". Strong stuff.

Mashable posted his staff resignation letter which actually, I liked.

(This is for Groupon employees, but I’m posting it publicly since it will leak anyway)

People of Groupon,

After four and a half intense and wonderful years as CEO of Groupon, I’ve decided that I’d like to spend more time with my family. Just kidding – I was fired today. If you’re wondering why… you haven’t been paying attention. From controversial metrics in our S1 to our material weakness to two quarters of missing our own expectations and a stock price that’s hovering around one quarter of our listing price, the events of the last year and a half speak for themselves. As CEO, I am accountable.

You are doing amazing things at Groupon, and you deserve the outside world to give you a second chance. I’m getting in the way of that. A fresh CEO earns you that chance. The board is aligned behind the strategy we’ve shared over the last few months, and I’ve never seen you working together more effectively as a global company – it’s time to give Groupon a relief valve from the public noise.

For those who are concerned about me, please don’t be – I love Groupon, and I’m terribly proud of what we’ve created. I’m OK with having failed at this part of the journey. If Groupon was Battletoads, it would be like I made it all the way to the Terra Tubes without dying on my first ever play through. I am so lucky to have had the opportunity to take the company this far with all of you. I’ll now take some time to decompress (FYI I’m looking for a good fat camp to lose my Groupon 40, if anyone has a suggestion), and then maybe I’ll figure out how to channel this experience into something productive.

If there’s one piece of wisdom that this simple pilgrim would like to impart upon you: have the courage to start with the customer. My biggest regrets are the moments that I let a lack of data override my intuition on what’s best for our customers. This leadership change gives you some breathing room to break bad habits and deliver sustainable customer happiness – don’t waste the opportunity!

I will miss you terribly.

Love,

Andrew

Groupon was the worst performing stock in the US market in 2012. Shares trade below 3 usd now, from when they floated at 20 usd. 11 billion of value has been wiped out. Groupon had turned down an offer of 6 billion usd some years ago from Google. And you might remember the accounting controversy at the time of the IPO.

What interests me in both of these stories is that you'd expect, in a recession, deal sites to be doing well. After all, it's in a recession that people want a deal and all the PR was, that this was what was happening. When clearly it's not and especially not for the segment leader, Groupon.

So I'm surprised. 

But then again there could be a more simple explanation. The market is good but these two companies were lousy. It could just be that, although that would surprise me.....

It seems that's what Forbes thinks who undoubtedly contributed to Andrew Mason's demise because they're such an influential magazine. Mind you, they seem to have forgotten that at the time before the IPO they were influential too calling Groupon, "the fastest growing company, ever".