Living Social Gambles on Half-Price Amazon Gift Certificates
Living Social is selling half-price Amazon gift certificates Wednesday, and as of late morning on the West Coast had already sold more than 500,000 of them, a cool $5 million in incoming revenue.
The $10 for $20 gift certificate is a no-brainer for U.S. ‘net users, and a great way for Living Social to land new users.
Amazon recently invested $170 million in the Groupon clone, and while it’s unlikely that LivingSocial will make any money on the deal, it probably isn’t going to lose too much, either.
LivingSocial, the clear second-place contender in the daily-deal space, probably isn’t paying full price for the gift certificates, and even if it loses $5 on each deal, even that’s a fair price to pay to build its subscriber base to compete with Groupon. The company also recently introduced a feature called “Escapes,” which offers deep discounts on long-weekend package deals to resorts and bed-and-breakfasts.
Deals sites often offer a $5 credit to users to get their friends to sign up for a company’s newsletter, and the deal sites are proving to be cash cows, as they typically take about half of the price of a discount coupon for themselves, and get that cash up front.
Groupon recently turned down a $6 billion acquisition offer from Google, subsequently raising nearly a billion in venture capital, It’s reportedly eying an IPO with a valuation of about $15 billion.
The Amazon deal is one-day only, and limited to U.S. residents, who can choose from 170 cities to associate themselves with for daily deals delivered by e-mail.
