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Chasing Groupon, LivingSocial raises $25 million

Despite the fact that Groupon dominates all of its smaller competitors in the daily-deals market, rival LivingSocial is trying to draw some blood by expanding with the help of a new infusion of venture funding.

It might not be getting as much coverage as the geolocation wars, but the battle for dominance in online daily-deals sites has been brewing ever since some start-ups decided they wanted a piece of leader Groupon's success. The latest development is that a second-tier player in the space, LivingSocial, announced Thursday that it's raised $25 million in a Series B funding round geared strictly toward growth and expansion.

The round was led by U.S. Venture Partners with participation from Grotech Ventures and Revolution, the firm chaired by former AOL CEO Steve Case. The goal with the funding is to put LivingSocial's local deals in "dozens" more U.S. cities by the end of 2010.

Rival Groupon, which says it has been profitable for nearly a year, raised a $30 million Series B round at the end of December.

LivingSocial first emerged on the Web as a manufacturer of Facebook apps like "Visual Bookshelf" and then started offering daily deals much like Groupon's, in which a minimum number of users must agree to purchase the deal before any of them can earn it, in a number of U.S. cities. The LivingSocial Deals have about a million subscribers, according to a release from the company, but the total reach of all LivingSocial products is an impressive 85 million.

Along with the funding round, LivingSocial has announced expansion to four new U.S. cities--Denver, Raleigh-Durham, N.C., San Diego, and Groupon's home base of Chicago. It's also launched an affiliate program so that third-party sites can run LivingSocial deals and (optimally) make a buck off them.