Living Social CEO and co-founder Tim O’Shaughnessy announced today on the company blog that he is stepping down. He will stay until a new CEO is found and installed — a process that he “hopes” will be completed during the first half of 2014. O’Shaughnessy previously worked at AOL, and transformed Living Social from its origins as a book review site.

O’Shaughnessy’s departure follows Groupon founder’s Andrew Mason’s departure last year, and marks an end of the founder’s era in the prepaid deal space. While we believe that prepaid deals are now a permanent part of the local marketing arsenal, the question remains whether there is a real future for the pioneer companies as they morph their models from high commission daily deals to shopping arcades, local targeting and business services.

Many, of course, have written off Living Social as a viable entity. The company sustained massive losses of $650 million in 2012 and $499 Million in 2011. Moreover, in a major loss of faith, Amazon wrote off most of its investment in the company. At the end of 2012, The Wall Street Journal cheekily suggested that it was one of the brands that would surely go extinct during the year.

Besides the losses, which were largely attributable to an expensive sales infrastructure, the company suffered major issues in 2013, including executive turnover; a multiple day outage; and having all its customers passwords hacked.

The company may choose to brand or merge with another entity that wants a head start in this space, such as a bank. But we see signs of life in many respects, including a deeper focus on mining their customer lists; efforts to morph beyond daily deals to coupons and other factors leading to deeper merchant relationships; mobile-oriented service, such as card linked offers; an enhanced focus on national advertising; retailer ties with companies such as Pier1 Imports, Macy’s, Reebok and OfficeMax ; and a pruning of unproven business areas, such as local events.

Last year, the company raised $110 million — including funds from many of its longtime investors –to get over the bumps. It also got additional money by selling South Korea’s T-Mon service for $260 Million to Groupon, and closed or sold several other international properties.

As O’Shaughnessy notes in his letter: “We now have the most stable and healthy business that we have ever had, and the luxury of having hundreds of millions of dollars in the bank to take us to the next level.”

We have more commentary on Living Social in this recent article by Steven Overly in The Washington Post.

Living Social CEO Tim O’Shaughnessy