If you haven’t been under a rock for the past few months, you’ve likely heard of Groupon. If you are a frequent user of day spas, you’ve probably even tried out their service: a daily opportunity to purchase a voucher that can be used to buy services or products worth, typically, twice as much as the price you pay for the voucher.
Groupon is famous for turning down a $6 billion offer from Google. Groupon then raised hundreds of millions of dollars and will likely go public in the next year or so. Another company in the “same space” is called Living Social.
Amazon.com recently invested $175 million in Living Social and today showed what else they can bring to the table to provide some rocket fuel to the growth of such a company.
While I have never purchased a Groupon voucher (I’ve never been to a day spa, either), I purchase stuff on Amazon every few days. So, it is a no-brainer for me to purchase a $10 voucher for $20-worth of stuff from Amazon.com!
By the time I saw the voucher offer, today’s Living Social offer had gone totally geek-viral. As Living Social shows how many coupons have been sold, I knew when I purchased mine a few minutes ago, they were
closing in on over 600,000 coupons (or, for the math-challenged, Living Social had already generated $6 million in total revenues today, 1/2 of which they will likely split with Amazon.) At the end of the day, depending on what percentage of the coupons are used, Amazon will likely receive $5 for each coupon sold and will be on the hook for $20 of mechandise.
Amazon, of course, wins two ways: They will (as with me) likely get more than $20 from my purchase, so the offer is an efficient advertising method. And second, their investment in Living Social will scale up as hundreds of thousands of customers (like me) will sign up for the service for the first time.
Everyone wins. Everyone, except, perhaps Groupon, who has touted its value as being so far ahead of the pack that no one can catch up.
My prediction: Amazon and LivingSocial will soon morph into one giant thing that will also integrate the Amazon Affiliate program so that, well, millions of people will be out here (like me) trying to get a piece of the action.
What do I mean, “me”? I guess I mean, if you click on this, I’ll get my $20 purchase free: http://bit.ly/gGUqcQ.
Later: CenterNetworks has a running tally of the coupons sold. By 10:00 p.m., EST, over one million had been sold ($20 million face value, $10 million in revenues to be split between LS and Amazon). It would be interesting to know how many new Living Social accounts were opened today (mine was). CenterNetworks also notes that deal-related forums were burning up with methods to get around the one-coupon per person limit. While that may inflate some of the numbers, I suspect that only a small percentage of the new accounts can be attributed to this hardcore fringe user category.
- Big Day for LivingSocial, with $10 Off a $20 Amazon Gift Card (readwriteweb.com)
- Groupon, groupon, groupon (RexBlog.com)
- “James Surowiecki on Groupon: “When we think about the Internet, we often think of businesses…” (rexhammock.com)