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.