As talks between Google and Groupon continue, interest in the social buying business is growing as illustrated by the news that Amazon.com has invested US$175m in LivingSocial, another group buying site with revenues of US$1m a day.
Sites like Groupon and LivingSocial allow hordes of internet shoppers in a given city or region to buy normally expensive items at discounts because as groups they can buy items in bulk. For example, if 100 people clubbed together they could buy Adidas sneakers for US$50 instead of the normal retail price of US$75 or get discounts of up to 50pc at their favourite restaurant.
The result is a grassroots e-commerce movement that is so successful that ordinary businesses in the US can barely keep up with demand and are turning customers away. A silver bullet for recession-addled businesses?
Google is in talks to acquire Groupon for an estimated US$5.3bn.
But it seems Amazon.com has gotten its "deal of the day" by making a US$175m investment in group buying rival LivingSocial, which has a user base of more than 10 million, revenues of US$1m a day and potential revenues of US$500m a year.
Washington, D.C., headquartered LivingSocial is an online source for people to find handpicked experiences at a great value, inviting anyone to save up to 50pc to 70pc each day on their favourite restaurants, spas, sporting events, hotels and other local attractions in major cities.
As well as the US$175m investment from Amazon.com, LivingSocial has also secured an additional $8m investment from Lightspeed Venture Partners.
LivingSocial says it will use this investment to maintain a steady drumbeat of worldwide launches and overall business growth while continuing to serve more than 10 million subscribers across the US, Canada, UK, Ireland and Australia in more than 120 locations.
Because of LivingSocial’s rapid expansion, the company is currently booking revenues of more than US$1m a day on average and is projected to book more than US$500m in revenue in 2011.
“To be the biggest player in the local commerce space there is no one better to work with than Amazon,” said Tim O’Shaughnessy, CEO of LivingSocial.
“As the social shopping space continues to heat up, LivingSocial is committed to staying focused on providing the high level of quality that consumers and merchants have come to expect when working with us,” O’Shaughnessy said.
LivingSocial has dedicated area experts on the ground in every location working directly with business owners, and constantly researching the best in local adventures to bring a savings of 50pc to 70pc for consumers.
Recently, LivingSocial expanded its business by acquiring adventure company Urban Escapes, and launching three new verticals including LivingSocial Family Edition, Campus Deals and LivingSocial Escapes, a travel site that offers unbeatable savings on curated adventures.
In addition, the company continues a regular flow of launches – on average one per day – and has expanded its reach in Australia with a controlling stake in Jump On It, making it live in five countries.