Is Amazon Investment In LivingSocial Sign Of A Feeding Frenzy?

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Amid rumors that Google is going after Groupon for $6 billion, Amazon has taken a $175 million stake in rival deal site LivingSocial. Adding to the frenzy surrounding local services and ecommerce, eBay on Thursday confirmed the acquisition of local shopping search engine Milo.com for a reported $75 million.

"Of course the question we're all asking is whether social buying is the next big play in our 2.0 world or is it tulipesque hysteria," Bill Tancer, general manager of global research at Hitwise, said in a blog post on Friday.

"Probably the most interesting difference is the percentage of Young Cosmopolitans ... that are frequenting LivingSocial," added Tancer. "From prior analysis we know that Young Cosmos are one the strongest early adopter segments ... Perhaps Amazon is recognizing the potential for LivingSocial to move beyond its current early adopter phase."

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Meanwhile, LivingSocial CEO Tim O'Shaughnessy said the company has found other ways to differentiate itself from the many companies fighting for a piece of the social buying space. "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.

In addition, LivingSocial said it secured an additional $8 million investment from Lightspeed Venture Partners. The Washington, D.C.-based startup said it plans to use both investments to increase its market presence.

Along with previous investment from Lightspeed, LivingSocial has received funding from U.S. Venture Partners, Grotech Ventures, and Steve Case's Revolution, LLC.

Like GroupOn and its many copycats, LivingSocial offers deep discounts on local deals on everything from spas and skydiving lessons to hotels and restaurants. Discounts range from 50% to 70% of the normal prices. If enough people buy into the offers, everyone gets the deal.

LivingSocial collects payment and passes it on, minus its fee, to the business. Like GroupOn, what makes the service so compelling is that people have an incentive to get their friends involved to make sure the minimum is hit.

Founded in 2007, the company presently claims roughly 10 million subscribers across the U.S., Canada, the UK, Ireland and Australia, along with average revenues of more than $1 million a day on average. Next year, LivingSocial said it expects to book over $500 million in revenue.

According to Hitwise, Groupon commands 79% of U.S. visits to the group-buying category, while LivingSocial comes in a distant second with 8% of the market.

With or without Groupon, Google has recently encroached on territory long dominated by Amazon and eBay.

Seeking to take its existing online shopping service to a whole new level, Google has recently added various new features to Google Product Search -- which, among other goals, aims to make it easier for users to find "soft goods" like clothes. To improve its shopping service, Google is relying on image-recognition, "visual search" technology from comparison-shopping site Like.com, which Google acquired back in August.

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.

Boosted by healthier ecommerce and the popularity of its Kindle e-reader, Amazon recently beat Wall Street estimates for the third quarter of the year. Year-over-year, sales were up 39% in the quarter to $7.6 billion, while net income was up 16% to $231 million.

Earlier this year, Amazon acquired deal-a-day site Woot for a reported $110 million.

1 comment about "Is Amazon Investment In LivingSocial Sign Of A Feeding Frenzy?".
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  1. Joan T from lfs, December 8, 2010 at 4:56 p.m.

    Wow! Such huge amount just for deal sites to expand to other cities.Hopefully, through expanding, these deal sites will attract more consumers to buy their deals and small businesses to team up with them. Just like Group Buy United (www.GroupBuyUnited.com), this site has merged with other deal sites (such as LivingSocial,GroupOn, etc...) to list very dependable daily deals at different cities. If you want to save money and time, just visit this website.

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