LivingSocial, one of many deal-of-the-day websites that have sprouted up over the past few years (and a major competitor of Groupon) was in the news this week because of their “$20 Amazon gift certificate for $10” offer which hit the internet like a firestorm. In less than 24 hours from the start of the offering, they were able to sell $10 million worth of these gift cards and the only reason they didn’t sell more, was that they pulled the offer because it became so popular. Sounds pretty impressive, right?…until you add the fact that LivingSocial recently received $175 million in financing from Amazon.
Unlike typical merchant coupon deals that are promoted daily by LivingSocial and others in the space, this particular deal was more about providing LivingSocial with massive (and needed) exposure in their quest to compete against Groupon.
Typically, local merchants participate in these type of coupon deals with the LivingSocials of the world to gain exposure with new customers in their particular geographic area. Clearly, Amazon’s participation in this deal was not done for the purpose of promoting the world’s largest retailer. Rather, it was accomplished so that LivingSocial would get all the publicity…and it seemed to work!
If you think about the deal in terms of “bang-for-your-buck” advertising, clearly this $10 million investment on Amazon’s part (remember, Amazon basically gave 1 million LivingSocial users $10 worth of free Amazon shopping each) got more exposure and new users for LivingSocial than any other possible advertising campaign.
As for a possible conflict of interest because of the (unmentioned) ownership link between the Amazon and LivingSocial, that thought was dismissed right off the bat by Amazon. Here’s all they would say about Wednesday’s coupon deal:
We’re happy to see that customers seem to like LivingSocial’s promotion of Amazon.com Gift Cards today. With Amazon’s vast selection of things to buy — and fast, free shipping on orders of $25 or more — we hope customers enjoy their deal.
Now that LivingSocial is in the minds of consumers with this recent burst of publicity, it will be interesting to see how they use this to build up a sustainable business model and to compete against the likes of Groupon and others.
Here’s the takeaway: LivingSocial’s coupon tie-in with Amazon hit the internet this week like a firestorm. What remains to be seen is how (and if) they can leverage the success of this one-time advertising campaign into helping them achieve a sustainable business model going forward.
