Amazon Poised to Make a Major Strategic Investment in LivingSocial to Counter Groupoogle (or Goopon?) Threat
With the red-hot acquisition dance between Google and Groupon sucking up all the attention, it’s easy once again to ignore the No. 2 player in the fast-growing social buying space–LivingSocial.
But not everyone is–according to sources close to the situation, the Washington, D.C.-based company that also focuses on local deals is in advanced talks for a major strategic investment–as high as $150 million–by online retail giant Amazon, at a very hefty valuation of over one billion dollars.
Sources said there will also be a deep operating partnership between the pair, as part of the deal.
Sources said the investment negotiations with Amazon is not complete yet, of course, and could fall apart.
But interest in LivingSocial has heightened of late, given the $6 billion in cash, stock and earnouts that BoomTown has reported that Google is considering ponying up to purchase the category leader, Chicago-based Groupon, and grab ahold of its 12 million users across the globe and $500 million in annual revenue.
But LivingSocial–which has been thriving even in Groupon’s flashier shadow–has 10 million subscribers worldwide in more than 120 markets and five countries, including the U.S., Canada, the U.K., Ireland and Australia.
And, as the start-up noted when LivingSocial announced its acquisition of Jump On It recently, it is currently booking an average of more than $1 million a day and is projected to book well more than $500 million in revenue in 2011.
That is what is apparently attracting Amazon, which has almost no profile in this lucrative local space, despite some attempts at its own solution. It bought a small and quirky daily deals site Woot, for $110 million in June.
But, rather than sell, sources said LivingSocial management wants to keep the company independent, and thinks a sale of Groupon will give it a huge opportunity for growth.
Why? Well, even though Groupoogle or Goopon are fun to say, the inevitable regulatory review could drag on, resulting in a slowing down of innovation in the bigger Google culture and the distinct possibility of newly rich Groupon execs flying the coop (in private planes).
More investment money should help.
LivingSocial announced in April that it had raised $14 million in a Series C round, after grabbing $25 million in a Series B venture financing only a month before. And it raised $10 million on top of that since 2008.
Sources estimated at the time that the valuation for LivingSocial was several hundred million dollars.
The newest round was led by Lightspeed Venture Partners; Earlier investors U.S. Venture Partners, Grotech Ventures and former AOL head Steve Case.
A report of the Amazon interest in LivingSocial was first posted several weeks ago in a in VentureBeat, a day before BoomTown first broke the news of the Groupon and Google discussions.
Both Amazon and LivingSocial declined to comment.
But here is an October video interview I did with LivingSocial CEO Tim O’Shaughnessy on a recent visit to Silicon Valley.
The entrepreneur has worked at AOL, as well as at Case’s Revolution Health in Washington, before moving on to the local deals start-up.