It isn’t often that you see something happen and know that it was an ecommerce earthquake but for the second time in 6 months a flash buying site caused a pretty big jolt on the Richter scale.
Living Social launched a $10 for $20 Amazon gift card promotion today and with 8 hours still to run they have sold 1.2 million of them. According to Center Networks chart they did 100K in the first 5 hours and then passed 1 million at 5pm west coast but the velocity of buying has slowed down from mid-day. My guess is that they will top out at 1.4 million given the time left and most of the available market probably already saw this.
Things I loved about the deal set-up and bigger economics.
- Wide variety of merchandise for mass appeal rather than relying on one brand name like the Groupon / GAP deal
- Referral virality with a personal link and 3 new users getting you a free deal. Very similar to DARPA red balloon challenge winners
- Living Social using the operational strength of their investorAmazon
- COGS of the actual item are near zero
- Deal is just slightly less than Amazon free shipping threshold of $25
- Amazon will make up much of any subsidy they gave on shipping, margin and lift
- Both Amazon and Living Social probably acquired new customers, although 95% will be for Living Social
- Some good beer money will be made on the float of a $11-15 Million dollar haul
- Instantly makes them a competitor to Groupon in most markets based on email reach, or at least closes the gap a ton
- Extends them further ahead of 3rd place BuyWithMe
- The data from when and what these people buy will be like gold for Amazon
- Grabbing this much market share probably increased the value of Living Social more than Amazon’s whole $175 Mil investment
Things that might have been done:
- Included charity element to speed virality
- Better cross promotion of a second local deal
- Introduction to Living Social Campus experience after purchase
- Cross promotion with major credit player (Visa, Mastercard) to drive payment card choice
- Notification of free gift certificate to bring me back with new referral link and higher threshold for second gift certificate, ie 10 referrals to get me to repost
- Partnered with Twitter or Facebook to include it in their daily deal formats (dicey but bold, enemy of my enemy is my friend strategy)
This may feel like the bubble days of $1 for $.99 but I think that this is slightly different as this is also attacking local add dollars for the Yellowpages, newspapers and radio. C round investor Jeremy Liew of Lightspeed is probably right that this was a big day and only the beginning.
Who knows what old school advertising foundations got rattled today and who we will see crumble in 2011.
Update: Final total was 1,301,296 Amazon vouchers.
Also I did get emails bringing me back to the site when people purchased but they were sent at midnight so I guess the server was a little clogged up during peak load.