LivingSocial Hits A Million Amazon Gift Cards Sold, $20 Million In Card Value
LivingSocial has been offering $10 off any $20 Amazon purchase since 5 am this morning and it's been a boon huge for the daily deals company, which Amazon has astutely invested $175 million in.
Context & Ripple Effects
The one-million-card day is the first visible payoff of the $175 million Amazon investment LivingSocial confirmed in early December 2010: the daily-deals company is deploying its strategic backer's discounting power to acquire members at scale, selling $10-off-$20 Amazon gift cards starting at 5 am.
The story traveled quickly — GigaOM picked it up the same day, framing the numbers as evidence of how much the Amazon partnership changes LivingSocial's position — and it lands mid-month in an active stretch for Amazon, which days earlier began letting Kindle users loan and borrow e-books and threatened to cut ties with Illinois affiliates over the state's Internet sales-tax push.
First-order effects
- LivingSocial adds roughly a million new members overnight, buying its email list growth with a promotion whose cost is effectively split between its own cash and Amazon's retail margin on $20 million of redeemed card value.
- Amazon gets $20 million in guaranteed future purchases plus direct exposure to daily-deals subscribers, validating the December decision to invest rather than build its own deals operation.
Second-order effects
- Daily-deals rivals now face a competitor whose headline discounts are underwritten by a retailer's balance sheet, raising the bar on how steep a deal must be to win members.
- For Amazon, the promotion demonstrates owned marketing channels as leverage at a moment when it is threatening state affiliates over sales-tax legislation — showing it can reach buyers directly when intermediary channels get costly.
Third-order effects
- If strategic retail investors keep underwriting deal inventory, daily-deal platforms drift from local merchant salesforces toward marketing arms for national brands, with the investor-retailer capturing the customer relationship the deal site built.
- The pattern points toward consolidation of the deals category around companies with both capital and something concrete to sell, squeezing independents that offer discounts without redemption economics behind them.
The trend: Daily deals is shifting from a standalone merchant-discount business toward a customer-acquisition channel funded by strategic retail investors.