Amazon runs big daily deal without LivingSocial

SAN FRANCISCO Wed Mar 21, 2012 4:33pm EDT

Amazon.com Inc's headquarters is pictured in the South Lake Union neighborhood of Seattle November 8, 2011. REUTERS/Anthony Bolante

Amazon.com Inc's headquarters is pictured in the South Lake Union neighborhood of Seattle November 8, 2011.

Credit: Reuters/Anthony Bolante

SAN FRANCISCO (Reuters) - Amazon.com Inc (AMZN.O) ran a big daily deal this week without its strategic partner LivingSocial, suggesting the world's largest Internet retailer is serious about building its own business in this fast-growing e-commerce niche.

AmazonLocal offered a $10 Amazon.com gift card for $5 on Tuesday and sold one million vouchers before capping the deal the same evening, according to the unit's website.

In January 2011, LivingSocial ran a similar deal, offering a $20 Amazon.com gift card for $10. The company sold 1.4 million vouchers and gained lots of new subscribers, helping it keep up with bigger rival Groupon Inc (GRPN.O).

The LivingSocial deal came a few weeks after Amazon invested $175 million in LivingSocial.

However, in June Amazon launched its own daily deal business, AmazonLocal.

Most of AmazonLocal's offers were created by LivingSocial's sales force at first. But AmazonLocal has hired its own sales staff in some markets and has been running more of its own deals lately.

From the fourth quarter of 2011 through the early part of this quarter, fewer of the merchants featured on AmazonLocal had previously run deals with LivingSocial, according to Yipit, which tracks the industry.

AmazonLocal's offer of a discounted Amazon.com gift card this week will help the daily deal unit quickly sign up lots of its own new subscribers.

"One of their challenges going forward will be to build their subscriber base for AmazonLocal which explains why they ran this deal," said Vinicius Vacanti, co-founder of Yipit. "Had they run this deal through LivingSocial, LivingSocial would have kept all of the subscribers."

Vacanti and others said the move suggests Amazon is hedging its LivingSocial investment.

"Amazon owns about a third of LivingSocial, but it is clearly hedging its bets by developing AmazonLocal," said Peter Krasilovsky, a vice president and program director at BIA/Kelsey, which tracks daily deals and the broader local ad market. "If it doesn't end up buying all of LivingSocial, which would be very expensive to do, it will have a deals platform in place."

Amazon spokeswoman Michele Glisson said the company has a "strategic relationship" with LivingSocial to provide local deals for customers across the country, while AmazonLocal's sales force is focused on providing national deals and deals in "select local markets."

She also said AmazonLocal plans to offer more deals from Amazon-affiliated websites in the future.

A LivingSocial spokesman said the company welcomes deals like the one AmazonLocal ran on Tuesday and noted that LivingSocial is the "primary provider" of deals for AmazonLocal.

Offers like Tuesday's "help increase member sign-up and brand awareness and that ultimately means good news for both our companies," the spokesman added.

Still, Boyan Josic, head of Daily Deal Media, which covers the daily deal sector, said Tuesday's offer makes it clear that Amazon views AmazonLocal as its main daily deal platform.

"How this affects their investment into LivingSocial isn't very clear to us at this point," Josic said.

(Reporting By Alistair Barr; Editing by Bernard Orr)

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