LivingSocial evokes dot-com boom with $20-for-$10 Amazon deal
As of 11 a.m., it had sold 338,405 cards. The deal expires at 8 a.m. tomorrow, with the only other limit being a one-card-per-account rule.
(Chief executive and co-founder Tim O'Shaughnessy is the son-in-law of Post Co. chairman Donald E. Graham. The Post also has a marketing partnership with the firm, as seen on this site's home page.)
We're used to seeing group-buying sites like LivingSocial's better-known competitor Groupon offer half-off deals from merchants looking for extra publicity and new customers. The biggest retailer on the Web does not fall into that category. Furthermore, it's not as if Amazon can expect to keep some money from people who buy these cards and forget to redeem them in time--Amazon gift cards don't expire, and it is essentially impossible not to find something to buy at the site.
Amazon, however, thinks LivingSocial is on to something, investing $175 million in the firm in December. That capped off a year that saw the firm hit 10 million subscribers.
Spokeswoman Maire Griffin didn't say if Amazon was underwriting part of this offer, saying only, "We're always looking for great deals... Amazon thought it was going to be a great offer as well." She did note the site's overall goals: It operates in 170 markets now and wants to hit 300 this year.
By contrast, Groupon has more than 50 million subscribers signed up for deals in more than 400 markets. The Chicago firm completed a $950 million round of venture-capital financing in January, not long after rejecting a $6 billion buyout offer from Google.
That's the context in which you should read today's lighter-than-air offer: LivingSocial is basically throwing money at the customer-acquisition problem. And when you look at how investors see firms like this--the round led by Amazon's investment put its value at $1 billion--it can afford to do so. At least for one day.
I can attest that LivingSocial's bribe worked on me. I hadn't signed up for LivingSocial's e-mails before; not only did I do that, I forwarded my personalized sharing link to a few friends in the hope that three of them will buy a card and, under the site's marketing offer, make my own purchase free. LivingSocial may wake up with a colossal dot-bomb hangover later on, but if it's going to go on a dot-com marketing binge today it would be rude of me not to take part.
3 p.m. The total sold is now up to 699,869. I've also put LivingSocial in the right neighborhood.
6 p.m. And it's now at 892,720. By way of comparison, until today the group-buying record--as far as I can tell--belonged to Groupon, which in August sold 445,000 $50-for-$25 Gap vouchers in its first nationwide promotion.
Also, note that I've expanded the disclaimer above.
A blog post by Martin Tobias, who runs a smaller competitor of LivingSocial, gives reason to think that the number could shrink further: He writes that buyers could use a browser debugging mode to spoof the site into allowing multiple purchases. LivingSocial's response is that the site doesn't settle each purchase and bill each buyer's credit card until after an offer closes, both to check against attempts to game the system and to ensure that three-for-free winners don't get charged.
Griffin wrote that the site's management doesn't see this as a widespread problem, adding in a later e-mail that she would provide a final, audited total but didn't expect "a drastic change." You'll see that number here when I have it.
| January 19, 2011; 11:00 AM ET
Categories: Shopping, Tips
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