Why Post-O’Shaughnessy LivingSocial Might Not Be Dead In Its Tracks

Closer to profitability than folks realize, source says

Tim O'Shaughnessy has announced that he will step aside as CEO of LivingSocial after co-founding the company in 2007. Per O'Shaughnessy's letter posted today via the firm's blog, the struggling digital discounts brand will replace him during the first half of this year.

Does the development mean LivingSocial is withering in a competitive e-commerce climate, as many have speculated for months? Well, a source close to the company—while acknowledging its myriad issues—thinks O'Shaughnessy's successor might have a decent shot at beating the odds. The person explains that LivingSocial has recently been close to profitability and could turn things around once it receives the $260 million it's expecting from its sale of Korean player TicketMonster to Groupon in the coming months.

"It's not like throwing cash on a bonfire anymore," the source said. "I think with a fresh set of eyes with a new CEO coming in, it's just a matter of what they do with the pieces they have for a long-term success story—instead of a dwindling has-been. They have a ton of revenue coming in, their losses are declining, and they have a ton of cash coming in. They have time to turn it around now."

At any rate, like many online and offline companies in a sluggish economy, LivingSocial's future is certainly in doubt.

The Washington, D.C.-based firm is currently a distant No. 2 to Groupon's first-place position in the field of deals players. In 2010, Amazon invested $175 million in LivingSocial. But two years later, CEO Jeff Bezos & Co. essentially wrote down all of that investment because of LivingSocial's bad performance.