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Living Social Buying a Million Customers?

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One of the biggest deals I've seen in a long time is running around the Internet tubes today. Living Social, a group deal company like Groupon, is offering a $20 Amazon Gift Card for $10 today. You just have to sign up and buy it. As always check the fine print, but I didn't see any gotchas. At noon (Pacific Time) as I write this more than 700,000 people have taken advantage of the deal.

As I've suggest before Amazon gift cards are the ultimate last minute gift. Why? They are good for almost anything you might ever want to purchase. (Yes, even 1500 Live LadyBugs... I challenge you to count them!) I realize this deal isn't exactly like $10 in free cash, but it comes pretty close.

Amazon isn't in the business of giving away $10 on it's stuff - it's not worth it to them. Why would Living Social do it? They are essentially buying customers... and the price is close to $10 a head. (I suggest it is close because Amazon makes deals with CoinStar to offer gift certificates in exchange of CoinStar's service fee). This is educated conjecture on my part, but I'm guessing that Living Social is putting up $16 for those $20 gift cards (getting a 20% volume discount). By selling them for $10, they are essentially giving away $6 for each person it signs up.

That $6 number may not be entirely accurate. Surely current Living Social members are taking advantage of the deal. In this case, Living Social isn't getting a new sign-up. On the other hand, the deal is creating quite a buzz. For instance, it got me writing about their company today. It's hard to put a price on the kind of buzz this kind of thing generates. I take that back. You might be able to put a price on the buzz. Competitor Groupon is rumored to have turned down a buyout offer from Google for $6 billion dollars. If Living Social can buy a few million customer for around $6 each and turn it into a $6 billion buyout from a larger company, it is nothing short of brilliant.

Update: I should have done a little more research. I didn't realize that Amazon was an investor in Living Social. That $6 price is probably much less than I thought.

Posted on January 19, 2011.

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9 Responses to “Living Social Buying a Million Customers?”

  1. Contrarian says:

    Hey Lazy – Buying a business for their customers is nothing new. In 1993 AT&T acquired McCaw Cellular, the nation’s biggest cellular phone company, for $12.6 billion.

    McCaw’s equipment, towers, office space, and cell network wasn’t worth all that much, but their 2 million customers were worth billions.

    Folks say content is king. Actually, subscribers, whether they be followers of coupons, blogs, or cellular phones, are and always have been … king!

    – Contrarian

  2. That’s not exactly apples to apples. LivingSocial isn’t buying Amazon’s customer base. With AT&T/McCaw, I’m guessing that not only bought the customer base (and the information in the customer database) but the customers were probably under contract – ensuring at least a short term revenue stream (something that is not necessarily true with this deal).

  3. Money Beagle says:

    It’s a win win. They get a million more customers they can try to get money from by selling future deals. Amazon gets increased business, and you know that, while some will spend their card on an item as close to $20 as possible, others will spend it on much bigger items, so Amazon will win. A million people just saved $10 each.

    I think it was a great promo and shows how partnerships between companies can pay off.

  4. I took advantage of the deal and always give a “mailing list” email for all these things anyway. It is a win win for all the parties involved. Amazon gets more business, living social got my whatever-it-is-worth email and I got free $10. If I run living social, I would have changed the interface a little though, they look exactly like groupon.

  5. td says:

    I ordered one Amazon gift card.

    They charged my credit card.

    I get their daily emails now

    I never received my gift card code!!!

    • Lazy Man says:

      I didn’t get my gift card code either. A note on the Living Social website asks customers for the Amazon gift card to be patient while they are processing them.

  6. I ordered one, received my code on January 20th and already spent it yesterday. I received notification that three of my “friends” signed up under me and I will get my deal free. Not sure how that happens because $10 was charged to my credit card. I think Living Social was not prepared for all the business they would get that day, I’m surprised their site didn’t crash. I signed my boss up for one, I will have to go look and see if her code is ready. I received two emails notifying me that a friend had signed up but there doesn’t seem to be a way on the Social Living site to see how many have signed up under you. My boss wasn’t one of the “friends” mentioned in the emails I received. They say on the site they will notify you whenever a friend signs up under you. Or was that when I friend buys a deal using your link? Anyway, you’re supposed to get your deal free if three friends use your link and buy the deal. Did anyone get their deal free?

    • Lazy Man says:

      I didn’t get any notification of getting mine free, but I can’t imagine I didn’t. I blogged about it and sent more than 100 people to the website. I’m pretty sure 3 signed up. I guess I’ll check my credit card statement in a bit, but either way, I’m pretty happy with the deal in general.

      If I were them, I would have been prepared for 5 million people to sign up instead of just the 1.3+ million. I think they knew they were going to make a huge splash in essentially giving out free money

  7. I really wish there was a way to see who signed up because of link if only to be able to shake my head once again at the likes of my coworkers who are never interested in free money. LOL!! One guy loves Baja Fresh and Groupon had one of the deals you know something like $15 for $30 worth of food and I told him about it, and he made like he was going right there to buy it and then he never did buy the thing because I remember checking at Groupon to see if anyone had. Whatever. Sometimes I just don’t get it. I contacted two people who I know personally who are Amazon devotees and I’d like to know if they took advantage.

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