Watch out, Groupon. Amazon.com announced yesterday that it has invested $175 million in social coupon service and Groupon competitor LivingSocial (News - Alert). Analysts see the move as just the latest sign that Amazon is seeking to send its tentacles out into promising new e-commerce arenas. (Amazon recently bought deal-of-the-day site Woot.com and members-only shopping site BuyVIP.com). Similar to the way Groupon works, LivingSocial lets users sign up for steep (often 50 to 70 percent off) discounts for goods and services at local businesses such as restaurants and salons. If you refer three friends who end up buying the same deal, you get the deal for free.
Groupon, of course, is a deal-of-the-day Web site that engages subscribers via their locality, and offers hefty discounts for local goods and services once a critical mass of people sign up for the deal. There are rumors that Google (News - Alert) may be very close to buying Chicago-based Groupon, which launched in late 2008 and kick-started the market for group discounts online. The purchase, if it happens, may set Google back as much as $6 billion (though there's a lot of debate on that number, so don't take it as gospel). The deal would be Google's largest-ever acquisition. This is, however, still speculation, as neither Google nor Groupon is talking.
Groupon wasn't the first to launch a group buying site, but it's been the most successful company to combine e-commerce and social networking into a successful sales channel. Its success led to a number of copycats, such as LivingSocial, CrowdSavings and Tippr.
LivingSocial, which also recently pocketed $8 million in funding from Lightspeed Venture Partners, said it will use the investments to grow its business. The company offers deals in 120 locations; over 10 million subscribers receive its daily e–mails. Groupon is still the larger site, serving more than 150 markets in North America and 100 markets in Europe, Asia and South America.
LivingSocial, which is based in Washington, D.C., was founded in 2007 and initially offered the social discovery Facebook (News - Alert) app "Visual Bookshelf" and later another one called “PickYourFive.” The company began rolling out daily deals in July 2009.
So far, that more recent business venture seems to be working. Spokeswoman Korina Buhler said LivingSocial is booking, on average, more than $1 million in revenue each day from its daily deals, and expects to earn more than $100 million this year. The company is on track to book more than $500 million in revenue from deals in 2011, she said.
Tracey Schelmetic is a contributing editor for TMCnet. To read more of Tracey's articles, please visit her columnist page.
Edited by Chris DiMarco