If we look at Groupon as a model, it becomes clear that SG&A is the major expense for a deals company like Living Social.

Earlier in its existence, marketing was also a huge cash sink for Groupon. This has improved for them as their product matured, but it's likely that Living Social is still spending a huge amount here, too.

http://investor.groupon.com/releasedetail.cfm?ReleaseID=7002...