Groupon and its daily deals competitors preach the benefits of businesses offering steep discounts—even providing goods and services at a loss—as an effective customer-acquisition strategy. Living Social, Groupon's biggest competitor, is putting its own money where its mouth is.
The daily deals company today kicked off a promotion that offers a $20 Amazon gift card for $10. The catch is that the offer doesn’t come from Amazon, which last month plowed $175 million into the company, but from Living Social itself. The payoff: Many thousands of people will get introduced to Living Social from sharing the deal.
As of noon (Jan. 19), nearly 500,000 people had accepted the deal. Living Social made the offer in all 170 markets in which it operates. It is limited to one per person. Buyers can earn a free deal if they get three others to buy the deal.
In many ways, Living Social is taking a page from Groupon’s book. The social-shopping juggernaut got a wave of attention when it ran a nationwide deal for Gap offering $50 of apparel for $25 at the retailer. Groupon ended up selling 441,000 deals in a single day.
Unlike that deal, in which Gap paid Groupon, Living Social is doing this one on its own as an authorized Amazon gift-card reseller.
Based on the sales numbers, it has already booked $4.4 million in revenue from the offer, although it would undoubtedly lose money if everyone redeems the gift cards. Prepaid gift cards typically have a 10-15 percent “breakage” rate of people who forget to redeem them.
Still, the offer got plenty of attention for the No. 2 player: It became a top trending topic on Twitter.