Amazon + LivingSocial = 20 Deals/Sec: Implications for Social Commerce

Group-buy social commerce platform LivingSocial just knocked competitor Groupon off the #1 spot, in terms of running the most popular group-buy deal ever award, at least, netting over 1m transactions.  Last month, Amazon invested $175m in LivingSocial, and yesterday the two celebrated the union, with a $10 for a $20 Amazon voucher deal, which runs until 8am ET (US) today (Jan 20).

Until yesterday, the most successful (in terms of purchase volume) group-buy deal had been Groupon’s Gap deal last August, ringing up 441,000 purchases for a $50 Gap voucher at 1/2 price ($25) in one day ($11m revenue), selling – at one point – 10 deals a second.

But by noon yesterday, 19 Jan 2011, that record had been beaten by the LivingSocial deal, ringing up just shy of half a million transactions. By late-afternoon, 3/4 of a million transactions had been processed, and by early evening – one million deals had been sold, selling at a rate of 20/second. In terms of deal value, LivingSocial had to wait until later in the evening to take the crown, surging past the $11m revenue mark.  By midnight 1,239,482 deals had been sold ($12.4m sales).

Earlier in the evening, 67 news articles had appeared in the New York Times, Wall Street Journal, The Washington Post, Wired, Huffington Post, USA Today and others, as the deal went viral on social media, racking up 42,715 Facebook shares and 6,762 Twitter shares.  One of the distinguishing features of LivingSocial (10m subscribers, 170 cities) vs. its bigger brother Groupon (50m subscribers 400+ cities) is the extra social layer the social commerce platform adds to the deal; you get the deal for free if three of your friends with whom you share the deal, buy into the deal. This of course, drives online word of mouth and social media shares.

So what should we make of this?  No doubt brand marketers will again lament the use of brand-eroding price promotions, as they did with the Groupon Gap deal.  We’ll hear that any fool can sell at a loss, and there must be more to social commerce than brand-toxic price promotions.  But as part owner of LivingSocial, it’s in Amazon’s own interest to drive the popularity of LivingSocial, currently the number #2 group-buy social commerce platform.  And in the context of the mooted IPO for Groupon this spring, LivingSocial could benefit from any halo effect of enhanced visibility.  The two social commerce platforms are also vying finalists for best social commerce app in this year’s tech oscars, the Crunchies – could this record-breaking buzz snatch victory from Groupon?

For us, three initial thoughts strike us from the LivingSocial Amazon deal.

• Firstly, it’s another proof-point that for social commerce to work, you have to offer something remarkable – either by adding value or reducing cost.  This is because, jargon-aside, social commerce is simply word of mouth in the context of retail – and word of mouth only happens when you have something worth talking about.  Simply replicating your store in Facebook won’t cut the mustard.
• Secondly, the deal points to the emergence of social commerce platforms that blur or bin the boundaries between online flash sales (Woot, Gilt et al.) and group-buy local deals (Groupon, LivingSocial).  Just as Groupon is running online deals with e-tailers, and Gilt is running deals with local retailers, LivingSocial is now offering realtime deals for online and offline stores.  Expect more of this.
• Thirdly, the deal also points to the power of partnerships in the social commerce space, just as consumer good giant P&G partnered Amazon to sell on Facebook last year, LivingSocial adds a fresh live-shopping dimension to Amazon, the grand-dame of e-commerce.  Expect to see more partnerships and collaborations between brands, retailers and social technology companies in 2011.

Excuse us now, we have to go spend a fistful of Amazon vouchers.