Over the past year, Amazon has slowly been entering that space, aiming to go up against industry-leading Groupon.

So far, it has done fairly well. For example, Amazon is the fourth-largest daily deal provider in the U.S., following Groupon, LivingSocial and Travelzoo, according to Yipit, a deal aggregator that closely tracks the major players.

Starting early tomorrow, the company is planning a publicity stunt to raise its awareness even further, by posting $10 Amazon.com gift cards for five bucks.

The offer will be distributed on the AmazonLocal site, via email and on some Kindle devices, and has the potential to sell out, since limited quantities will be available. (Don’t get too excited, it’s limited to one per customer.)

As part of the promotion, Mark Eamer, a director of product at AmazonLocal, provided a glimpse into the company’s plans in the crowded local deals space (but that’s pretty good, considering the company’s corporate culture to not disclose much of anything).

Offering gift cards is a common way for companies in the space to drum up new subscribers, even though the companies often lose money. For example, last year, LivingSocial sold 1.3 million $20 Amazon gift cards for $10 apiece, Groupon pawned discounts for Barnes & Noble, and more recently, Google offered up gift cards from REI.

Eamer said this represents the first time it has sold gift cards for Amazon.com, but in the past, it has sold deals for other Amazon-owned properties, such as Diapers.com and Soap.com.

Up until now, most of AmazonLocal’s growth has been supported by the $175 million strategic investment it made two years ago in LivingSocial. Nine months ago, Amazon launched its first local deals site in Boise, Idaho, with the help of LivingSocial, and today it operates in 90 markets across 26 states and the District of Columbia.

Eamer said that even now most of the deals listed on the site come from LivingSocial, although AmazonLocal is hiring its own sales team in Seattle and in other locations to help source deals. He declined to say how many people work in the division.

Still, it’s clear that one of Amazon’s advantages in getting merchants to work with them over a competitor is its scale, he said.

Eamer would not disclose how many subscribers have signed up for AmazonLocal, but overall, the company has 164 million active customer accounts worldwide, defined as people who have made a purchase on the site in the past 12 months.

“There’s lots of competitors in this space, and we all want attention from the merchants. By far and away, they [merchants] answer the phone and want to hear what we have to say. We have relationships with millions of merchants around the world, and 164 million customers worldwide. We know how to work with merchants and connect with customers — it’s unique to Amazon.com.”

In the future, Eamer said, AmazonLocal would be open to talking to other providers beyond LivingSocial to bring more offers to the platform. “We would consider it and evaluate that as time goes on, or as another relationship presents itself,” he said.

Amazon’s success in the space is important not just because it is interested in going up against Groupon, but because it uses offers to discount the price of its hardware, including the Kindle e-readers. For instance, a Kindle Touch “with special offers” costs only $99, but one without offers — a.k.a. ads — is $139. In other words, if it can subsidize the cost of its hardware through the use of these offers, it can compete more deftly against Apple and others in the tablet space.

Another goal for the year is to continue to refine its targeting abilities. Currently, offers are only delivered to people based on geography only.

“One of our key tenets is delivering the right deal to the right person at the right time … Our targeting is limited by geography, but we’ll be working on some things in 2012.”

Of course, in the case of tomorrow’s Amazon.com gift card, it will be sent out to everyone.

The promotion goes live Saturday and will serve as a way for Amazon to increase usage of its bar-code-scanning application, while also collecting intelligence on prices in the stores.

This holiday season, mobile commerce is surging as more people become comfortable using applications on their phone to compare prices or simply shop when not at home or at work.

On the Monday after Thanksgiving, the biggest online shopping day of the year so far, mobile sales reached 6.6 percent, jumping from 2.3 percent in 2010, according to IBM’s online retail study.

Amazon is not the only company hoping for a strong mobile Christmas.

Last quarter, eBay started airing TV commercials – its first in the past few years — to promote its mobile applications. The company estimated that mobile commerce merchandise volume this year will hit $5 billion. Additionally, eBay’s PayPal unit is expected to exceed $3.5 billion in mobile revenue.

Amazon has never released figures on how well its mobile applications do.

While the information empowers consumers, it terrifies retailers, who increasingly are feeling like showrooms — shoppers come to to check out the merchandise but ultimately decide to walk out and buy online instead.

Amazon’s Price Check app, which is available for iPhone and Android, allows shoppers to scan a bar code, take a picture of an item or conduct a text search to find the lowest prices. Amazon is also asking consumers to submit the prices of items with the app, so Amazon knows if it is still offering the best prices.

“We scour online and in-store advertisements from other retailers, every day, year-round,” said Sam Hall, director of Amazon Mobile. “Now, we are enabling customers to use the Price Check app to share in-store prices while they search for the best deals.”

While Amazon’s applications and its $5 incentive can be viewed as friendly to consumers, physical retailers will see it only one way — as an attack.

The one-day promotion Dec. 10 will offer 5 percent, or up to $5, off on as many as three items.

The investment round values two-year-old One Kings Lane at $440 million, said Chief Executive Doug Mack. The San Francisco start-up, which is unprofitable, is on track to bring in more than $100 million in revenue this year, he said.

One Kings Lane sends its more than two million subscribers emails and other notifications offering discounts of about 50 percent on designer furniture and other home goods. The discounts are available on the site for just 72 hours. Unlike traditional e-commerce sites that serve shoppers on the hunt for something, flash sites appeal to serendipity.

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Ironically, the event took place at Terranea, which was the same resort where Google demonstrated its Wallet and Offers platforms at the D Conference only three months ago.

Since then, not only has the space heated up, with all the major players announcing their plans, but so has the rivalry between the two Bay Area companies. PayPal filed a lawsuit against Google for stealing trade secrets and key employees, and now they will compete for the attention of merchants and consumers.

In an interview, PayPal’s president, Scott Thompson, explained how the online payments leader was different, and why he believes the space will take off “faster than you ever imagined.”

In demonstrations earlier in the day, PayPal showed me a number of different scenarios, including using a phone number and PIN code to replace swiping a credit card at the payment terminal. It is also integrating check-in capabilities to its mobile application and location-based services to identify nearby stores or restaurants. What it won’t be doing is relying on near-field communication technology or implementing an offer network, unlike Google’s approach to the market.

Thomson, in his thick Boston accent, was eager to share his side of the story, after hearing so many other competitors go before him. Here are some highlights from the interview:

What problem are you solving?

Thompson: An offline merchant today is seeing slow to no growth. It’s tough. E-commerce companies are still growing, and if you have both, you are seeing slow to no growth.

First, we know merchants are worried about consumers coming to you from all different ways — online, in-person, mobile, etc. Multichannel retailing is real for them.

Second, retailers are asking “Who is the customer?” If you visit the site, we know. There’s a wealth of information about them. In offline, they don’t even know you are in the store.

You are battling the competition with your hands behind your back. The question is “How do I close the loop? How do I know that Tricia’s here?” Our solution does close that loop.

What about NFC? In the four presentations I saw, it wasn’t used once.

Thompson: We are not embracing technology, we are solving the problem of what can I do today. It’s hard for me to speak [about NFC] until there are standards. You can’t ask retailers to implement three to five standards.

We can’t be so bold or arrogant to think that you’ll adopt to the standards we’ve created. If we said “Throw away your terminals and get a new one, or buy a new phone” — no one has that level of influence and pull to say “You’ll have to adopt to the standards we’ve created.” … We will work with the new and the old.

If we only built something that worked with this phone, this bank, and this network and NFC, you might address 50 people out of the 350 million people in the U.S. We hope that all 350 million people use what we are doing today.

You boldly predicted recently that by the end of 2015, digital money will be accepted everywhere in the U.S. Some people think you are nuts!

Thompson: This wave is going to happen faster than you think. If every consumer can pay with PayPal with a mobile phone number and a PIN, then I don’t ever have to reach and find this [Thompson pulls his money clip out of his pocket].

Why is that a possibility? There’s lots of reasons!

The value to the merchant is compelling, and the other thing that’s true is that there’s been a lot of compression of credit. A whole lot of people don’t have credit cards, and there’s a higher number of debit transactions. That’s an important change, if your debit card is compromised. The bad guys will get your money. I need more security than ever before. So, will it happen? Will it be fast?

It will be faster than you ever imagined. The one that wins will be the wallet that lives with you everywhere.

How important is this intiative to PayPal? It has spent hundreds of millions of dollars in acquisitions to get to this point.

Thompson: At analyst day, we said we would double our business by 2013, and those numbers don’t take into account any revenues from this point-of-sales initiative we are working on. This is going beyond to the next three-year commitment.

We’ll see revenues next year, but we are planting the seeds now [for 2014]. We said revenues would total $6 [billion] to $7 billion in 2013. To continue to grow at the same rate in 2014, you better do things now. We see an opportunity. We see technology changing, and now is the time to invest.

Just because you aren’t using NFC right away, doesn’t mean you won’t have a steep adoption curve. You’ll have to sign up offline merchants and get consumers on board.

Thompson: Our work is hard, and the relationships we’ll forge will be hard, too. You’ll see next year, when we formally announce our partners, that they are very big merchants.

[On the consumer side] If merchants see value, and integrate it and push it, consumers will use it. It will become a natural thing for you to use it in the grocery story or the pharmacy. You’ll be able to use it for everyday spending — that’s age-old logic. If the companies with the most foot traffic use it, it will be adopted.

So, it’s not for the mom-and-pop coffee shop?

Thompson: It’s where you are most frequently visiting.

Let’s talk about the competition. There’s American Express, Visa, MasterCard, Google and others, like Square, all coming up with different mobile payment strategies.

Thompson: I love it! I actually do!

It reinforces that the opportunity is big. I find it humorous that they find it a novelty. It wasn’t long ago — after all these years of them saying that no one needed a [digital] wallet — that they are saying that the wallet is now important and we better have one.

Besides, this is not unique to PayPal, but we play better the more sophisticated the competitor is. It’s remarkable how competitive our organization is.

Other payment providers are rolling out wallet technology for the chance to offer coupons or offers to the consumers — which could be a lucrative local advertising strategy. Will you be doing the same?

Thompson: In subsequent releases, merchants will be able to do things in the wallet, like offer coupons, but it is not our intention to compete in offers. We are doing payments.

I talked to a major retailer recently that said they’d find it a conflict if the payments provider offered discounts, rather than the retailer being the one to own the relationship with the consumer.

Thompson: That’s where we are different. The others are about coupons and advertising. We are about payments. That’s where 110 percent of our focus is. I believe we have this right. This will be a really big phenomenon in the multichannel world. We are in the business to help merchants grow their business. We are not trying to take the customer relationship away from them.

If we do our job right, all of our businesses will grow.

AmazonLocal first went live in Boise, Idaho, on June 2, and then followed up yesterday by launching in its hometown of Seattle and three neighboring suburbs, Tacoma, Bellevue and Snohomish County.

For now, Amazon says, the deals are all sourced by Washington, D.C.-based LivingSocial, but that will change over time. “AmazonLocal will soon offer direct deals sourced by Amazon,” a spokesperson confirmed.

Amazon invested $175 million in LivingSocial in December, timed perfectly with acquisition talks between Google and Groupon falling apart.

The rollout of AmazonLocal is not the first time we’ve seen Amazon experiment in the deals space.

For $25 off a Kindle, Amazon will subsidize the hardware by serving ads on the e-reader’s screen. Instead of typical ads, a lot of them were a lot like offers, such as a $20 Amazon gift card for $10; $6 for six Audible books (normally $68); $1 for an album from Amazon’s MP3 Store and $10 for $30 of products in Amazon’s Demin Shop.

Eventually, you can imagine the two initiatives merging to create an offering different from either Groupon or LivingSocial.

For instance, Amazon may try to go after a much more tailored approach. Today, the daily deals that are sent to our inboxes are not very personal — a man will receive an offer for a manicure and a woman could receive a discount for a barbershop.

Both Groupon and LivingSocial are trying to become more relevant by delivering better offers using your location. But Amazon’s approach could be based on your purchasing history.

Already it’s experimenting with this by allowing Kindle users to dictate the kind of ads they will see by placing votes on a system Amazon calls the AdMash.

While details are fuzzy, I see a bigger correlation with what Google is doing in the space with Google Wallet, which is supported by local coupons and other offers that may be of interest to the user, than what Groupon is doing. Retailing and merchandising, more than advertising, is in Amazon’s DNA.

Regardless of the future, Amazon’s first day in a large market clearly demonstrated its access to a very large population. Across the four Seattle-area deals, AmazonLocal sold 4,801 offers on Thursday. (And I thought it was impressive that Google sold more than 8,000 offers in its first 22 days in the Portland market. Go figure.)

For LivingSocial, Amazon is a strong partner.

The company, which already operates in the same Seattle markets, was able to bring in roughly $170,000 across both sites in total. (That does not take into account how much it shares with merchants, or what it might share with Amazon.)

It probably helps that the AmazonLocal deals are not exact replicas of what LivingSocial is offering on the same day. Amazon said that’s on purpose.

The biggest performer yesterday was $15 for $30 at the Coho Cafe Restaurant & Bar on the Eastside, which was purchased by 2,709 people. The second biggest performer was in Seattle. The Garage, a bar with bowling alleys and pool tables, sold 1,207 $25 deals for $50.

That deal was sold by Jessie Burrough, a LivingSocial employee, who was featured in a story I wrote about a day in the life of a daily deals salesperson. Coincidentally, the last time the Garage conducted a deal with LivingSocial, it sold nearly the exact same number of vouchers.

Mary Osako, Amazon.com spokesperson, provided this statement about the launch:

“AmazonLocal isn’t just about the amazing deals; it’s about opening up Seattle, our hometown, for exploration. From coffee shops to the arts scene, there are so many innovative businesses and locally-developed services to try out right in our own backyard. With AmazonLocal, Seattleites can rediscover their city and get great deals at the same time.”

Starting today, the additional category takes off, offering steep discounts to hotel rooms around in about 30 locations.

The launch of Overstock’s vacation category–its fifth new category since 1999–marks a substantial investment for the publicly held company.

The decision to pick travel is in line with what Gilt Groupe’s Jetsetter and LivingSocial.com’s Escapes are doing in terms of offering occasional deals to certain locations. With all of them, the focus is on price, not selection.

But rather than Gilt’s high-end affluent niche and LivingSocial’s curated-packaged approach, Overstock’s inventory is more for the masses–something you’d expect from Expedia, Orbitz, Priceline or Travelocity.

On day one, the choices will vary.

Three nights at the Crowne Plaza London at Heathrow costs $207.85 per person during May. In June, the four-star Renaissance New Orleans Marquette Hotel will run $238.14 per person for three nights. A perfectly decent hotel in Honolulu, which is a little drab and is across the street from the beach, will cost $351.25 per person for seven nights.

But how much you are saving is not exactly obvious.

“We’d love to put the rack rates up there, and if you go to other travel sites, you’ll see these are slick deals, but at the moment we aren’t putting up the rack rate,” said Overstock’s CEO Patrick Byrne. “The suppliers would like to make it not so transparent.”

The Vacations tab will be featured prominently at the top of the web site, along with the other categories of Shopping, Cars, Real Estate and Auctions.

The addition follows other recent launches by Overstock, including Eziba.com, which focuses on selling a small number of items, ranging from furniture to jewelry, at heavily discounted prices via a daily email.

As for the Vacations business, Byrne said they’ve hired a dedicated sales team to source the deals. “We have been working on it for about a year, and we believe we can expand the cities and inventory very quickly.”

The deals are colorfully laid out on the page to highlight the scenery in each location. They can sell out, or at least that’s the hope.

“This is the equivalent of a private shopping site. They will sell out and quickly. Or, at least we hope so, and then we’ll go get more,” Byrne said.

Nordstrom will acquire the company for $180 million in stock. However, the transaction size could jump to as much as $270 million over time if the company meets certain performance goals and vesting requirements for the existing management team.

At that price, the transaction gives a lot of weight to a burgeoning new area of e-commerce, fueled by private/flash sales and other group-buying trends.

Los Angeles-based HauteLook offers discounts of 50 to 75 percent off home, beauty, travel and local services for women, men and kids. In the last two years, HauteLook says it has conducted 2,500 private sales events for 1,000 high-profile brands.

Seattle-based Nordstrom said HauteLook will operate as an independent, wholly owned subsidiary, to be managed by its current leadership. The HauteLook brand and Web site will remain separate from Nordstrom, and there are plenty of incentives to keep the management team in place.

While Nordstrom is primarily a physical department store, it has a fairly sizable online presence and recently has spent time integrating its online and store presence, so customers can see what inventory is online and what’s available in the store.

The transaction is expected to close in the first quarter of 2011 and is subject to customary closing conditions, including regulatory and HauteLook shareholder approval.

The company said it is performing well, as deal seekers around the world–from North America to Western Europe to the Asia-Pacific region–look for deals on hotels and rental cars, specifically, and benefit from improvements in the economy.

The company’s stock is trading at $463.33, up $6.32 a share today. A new 52-week high was hit yesterday, trading at $459.57 a share.

Yesterday, Priceline announced it entered its fifth straight year of its well-known advertising campaign, featuring William Shatner–a.k.a. “the Priceline Negotiator.”

Shatner is portrayed as a James Bond-like character who will stop at nothing to obtain the best travel deals and maximum savings for Priceline customers–although he does silly things along the way, too, like watch a gorilla wrestle a scrawny man.

Shatner will be joined in the campaign–created by Butler, Shine, Stern & Partners–by new sidekicks Naomi Pryce and the NBA’s all-time leading scorer, Kareem Abdul-Jabbar.

The Norwalk, Conn.-based company will release its fourth-quarter and full-year results Feb. 23.

Expect the focus to be on growth.

Priceline is forecasting total gross travel bookings to jump year-over-year by 36 to 41 percent, with most of the growth coming internationally.

International bookings are expected to jump by 54 to 59 percent vs. minimal growth in domestic gross travel of 5 to 10 percent.

Annual revenues are forecasted to jump by 31 to 36 percent, and gross profits are expected to soar by 49 to 54 percent.

As a close competitor to Priceline, Expedia.com hit a 52-week high of $29.85 back in September, but has fallen considerably since, to trade around $21.69 a share.

Yesterday, Expedia relaunched a new price-savings campaign called ASAP: A Sudden Amazing Price. The  promotion will offer two discounts a day on hotels and other items of up to 50 percent, aimed at both sides of the country.

Likewise, it will give merchants the tools to find customers immediately should business get slow.

The service represents a big shift in the way daily deals are sold.

Instead of having to commit to a restaurant deal at least a day in advance, consumers can search for a discount in real time, on the way to lunch or dinner. And for merchants, it solves an immediate problem–it can offer a service right away, rather than selling a discount voucher that can be redeemed at other times.

The idea of walk-in deals is the latest evolution of the rapidly evolving daily deals space, which is fueled by stiff competition and millions (wait, scratch that), billions of dollars in venture capital.

“This could be a big next step in how people interact with local businesses. It’s a more efficient marketplace, and whenever you can do that, there’s potential for a lot of success,” said LivingSocial CEO Tim O’Shaughnessy.

The concept is brand-new for LivingSocial.

Just yesterday, it started approaching merchants about “walk-in” deals and plans to launch them in Washington, D.C., first, over the next couple of weeks. Soon after that, it will roll out the deals steadily across the country.

The service, however, is akin to efforts by others in the space, such as Foursquare, Gowalla and Facebook.

But matching a critical mass of merchants who are willing to make an offer at a particular location and time with a critical mass of consumers is extremely difficult to do.

O’Shaughnessy believes LivingSocial can check both boxes.

“From the merchant perspective, there’s a reason we invested so heavily in a field sales team–it’s so we could try new initiatives. Getting a density of merchants is going to be easier for us than other check-in deals stuff,” he said.

As for customers, he said, “We have a really big mobile presence already. We are in the millions on iPhone or Android apps. They buy through us and redeem through us, and we have an active user base already.”

LivingSocial, which is backed by Amazon.com, will spend the next few months educating merchants as well, O’Shaughnessy said.

To make it all work, the company will be testing out different platforms, including giving merchants iPads and other proprietary hardware. During the pilot, LivingSocial will pay for that hardware.

By getting the tools in their hands, merchants will be able to  spontaneously decide whether their lunch crowd isn’t big enough and create a deal on the iPad that is designed to get people through the door within minutes. Once created, the deal will be instantly pushed out, and could expire a couple of hours later, based on the merchants’ preferences.

As with other offers found on LivingSocial or its competitors, like Groupon, merchants may ask the customer to pay $3 for a $5 sandwich or salad, and the customer must buy the voucher up front from the mobile application.

LivingSocial’s very lucrative business model will remain the same for walk-in deals, O’Shaughnessy confirmed.

That means, if a consumer pays $10 for a $20 dinner, LivingSocial will take roughly half, or $5.

Once inside the establishment, consumers can always choose to pay more for additional items–a drink or bag of chips with that sandwich, maybe?

Many of the major location-based social networks launched in early 2009, including Latitude. But Latitude was different: Instead of asking users to manually check in, it continuously displayed their locations on a map in real time. The specificity of that information meant Latitude was primarily used for location-sharing with close friends and family.

Due in part to Google’s heft, the service is relatively popular; now available on all the big smartphone platforms, it has 10 million users who participate each month, compared with six million registered users for Foursquare.

Still, in the past year, just about every local-social pundit and competitor has announced a desire to go “beyond the check-in.” In that context, Latitude’s move to catch up seems oddly timed.

Ken Norton, senior PM for Latitude, justified today’s change by saying Latitude users have been asking for check-ins. Plus (and this is no small thing), Google is associating check-ins with its Google Places project, which means Latitude now has a business model: Connecting its users to local merchants.

Google is not facilitating Latitude-specific deals yet (as companies like Facebook and Foursquare already do), but Norton said there’s nothing stopping merchants from giving a discount to people who check in frequently.

What’s different about Latitude’s version of check-ins? There are a few innovative tweaks that some users may prefer. Google will automatically detect when users are stationary in a place it considers a business, and send them a notification asking if they want to check in.

Also, (with user permission) Latitude supports automatic check-ins for common venues, as well as supporting “checking out” of a place when the users’ location indicates they’ve left the building.

However, users cannot add locations; so, for instance, they can’t check into their homes (unless their homes are already businesses with Place pages).

And while Latitude is hopping on the trend, how about a sprinkle of gamification! Based on their participation, users can qualify to be a “Regular,” “VIP” or “Guru” of a specific establishment. However, there is no leaderboard or public acknowledgment of such users, yet.

Users can publish their locations to their public-facing Google Profile, if they want to share beyond their Latitude friend network. It’s expected that Google will increasingly include these public profiles in new social product launches.

The capability to check in on Latitude is only available on Android to start (through the new Google Maps 5.1 app), but should be coming to the BlackBerry, Symbian and iPhone, said Norton.

In December, retail sales jumped 0.6 percent as consumers bought more goods from online retailers, drugstores and building-supply companies.

When excluding auto sales, which can vary wildly, sales were up 0.5 percent, which was just shy of the 0.7 percent forecast that economists surveyed by MarketWatch were expecting.

The biggest gains in the retail sector were led by online and catalog companies, such as Amazon and Land’s End. That category witnessed sales jump 2.6 percent, the biggest increase in almost three years.

Earlier reports by comScore hinted that may be the case, with December online sales up almost 12 percent over last year. Many retailers encouraged shoppers to spend online by offering discounts and free-shipping incentives up until the last few days before Christmas.

Overall, the full-year gains were the most impressive numbers from today’s government report. Retail sales jumped 6.6 percent in 2010 compared to the year-ago period. The last time sales rose at a faster clip was 11 years ago during the Internet boom, when sales surged 8.2 percent.

Of course. But has it raised nearly $1 billion?

That’s the number being thrown around today by VCExperts, which claims to have seen documents filed by Groupon with the Secretary of State’s office.

And our sources say that’s the right number, with the company’s valuation placed at $4.75 billion, but that the deal hasn’t firmed up yet, and it doesn’t involve any one major new investor. A Groupon representative declined to comment on the report.

In the meantime, Groupon has the gigantic round it raised eight months ago to lean on. BoomTown’s Kara Swisher reported in April that Groupon raised $135 million at a $1 billion valuation.

The big thing that’s likely changed since then is the company’s run-rate, now at $2 billion annually (up from the previously reported $500 million).

The group-buying site, which offers consumers discounts of 50 to 70 percent on things like trips to spas and restaurants, already has a plethora of investors.

It has raised money from the same Russian investors that backed social networking powerhouse Facebook and game phenom Zynga, as well as from Digital Sky Technologies and Battery Ventures. In December, Groupon nabbed $30 million in its second round of funding, led by Accel Partners.

The money in April was being set aside for growing the business and getting ahead of its numerous rivals.

One investment source that has since dried up is Amazon, which decided to back Groupon’s nearest rival, LivingSocial, with $175 million. Kleiner Perkins has been named as a potential candidate, but it would also be nice to see a deep-pocket media company step in.

Newspapers, specifically, have been hard hit by a shift in local advertising and classifieds. A Groupon partnership could make it less appalling that they’ve missed yet another trend.

Such steep discounts are a cornerstone of Amazon’s strategy to gain traction in a market in which iTunes remains the dominant player. At the same time, a debate has arisen among music labels about whether such discounts risk undermining the value of their products.

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TrialPay is bringing the concept of enticing shoppers with the latest tabloid magazine, a pack of gum or a Snickers bar from the line at the grocery store to the online checkout world.

However, there’s a twist: If you bite, you’ll also get a discount on your original purchase.

Up until now, the Mountain View, Calif.-based company’s offers were most likely seen by people playing Facebook games.

Through a fairly exclusive partnership with Facebook Credits, TrialPay can offer a virtual good for free if a player considers buying another deal, like a cup of Starbucks coffee or a Chipotle Mexican Grill burrito.

TrialPay’s founder and CEO Alex Rampell explains that Starbucks or Chipotle pays TrialPay for the sales lead, and TrialPay pays FarmVille. Rampell said it’s a system consumers are comfortable with, because they are often buying physical goods, rather than intangible goods.

TrialPay’s new service, which is coming out of a long beta today, is bringing these alternate payment options to the online shopping cart. The goal is to convert more sales before they are abandoned at the point of sale.

One of its guinea pigs was MediaMall Technologies, which sells online streaming TV subscription packages. It offered customers a $15 discount on its PlayOn Premium software (normally $40) in return for signing up for a particular offer.

One such offer required users to also sign up for a GameFly subscription, which sends videogame rentals to your door, or a RealPlayer SuperPass.

Rampell said MediaMall immediately saw a 10 percent increase in revenue and a dramatic increase in average order value. The increase in average order value was due to the fact that it received a bonus commission based on every in-cart offer completion.

TrialPay is calling it a hosted shopping cart because it also handles the various payment systems, including PayPal and credit cart providers, on behalf of the retailer.

ComScore said in the past week alone, four days exceeded $800 million in spending, including Cyber Monday, which became the heaviest online spending day on record at $1.028 billion.

On Tuesday, spending hit $911 million, making it the third-heaviest day on record, and Wednesday and Thursday came in at $868 million and $850 million, respectively. These figures include both physical merchandise, and relatively new categories, like virtual goods.

The big winners in the past week have been the Amazon.coms of the world and other large retailers, comScore noted.

The top 25 online retailers generated 20 percent more sales for the month of November, compared to last year, and their share increased to nearly 68 percent of the market. Meanwhile, the marketshare of small-to-mid-size retailers shrunk to 32.2 percent.

These increases aren’t expected to last as some retailers became less aggressive with promotions and discounts toward the end of the week, when year-over-year growth rates fell to single digits. “We may see another week of this effect before late season discounts and buying by procrastinators gives the season a final spending surge,” said comScore chairman Gian Fulgoni.

Now, Google may be on the verge of buying one of those companies, Groupon Inc., for $6 billion or so, and another one, LivingSocial Inc., just bagged a $175 million investment from Amazon.com Inc.

Snicker no more. Daily deals are big money, and big money is required to gain dominance.

“The size of the round is enormous because the size of the opportunity is enormous,” said Jeremy Liew, managing director at Lightspeed Venture Partners, which added $8 million of its own to the round.

The Amazon investment, as well as the potential acquisition of Groupon by Google, signals the quick explosion of and high expectations for an online-to-offline local small business advertising industry that just three years ago did not exist.

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The deal will be announced this week, the person added. BuyVip offers overstock items from brands like Dolce & Gabbana, Louis Vuitton or Levi’s for steep discounts. The company doesn’t buy the stock itself but acts as a broker between fashion brands and consumers using its marketing and online-distribution channels. “BuyVip has huge growth potential. After sales of €60 million in 2009 the company now expects sales of over €130 million,” the person close to the sale process said.

BuyVip is owned mainly by a consortium of private-equity companies including Cipio Partners, Kennet Partners, Spanish fund Debaeque and the venture-capital arm of German media conglomerate Bertelsmann AG. Amazon ( (AMZN)) wasn’t immediately available for comment.

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That’s a real problem, because Oracle was obligated to do just that under the terms of the General Services Administration contract by which it was bound.

“The whole idea of GSA schedule discounts is that the government, in the aggregate, is likely to be one of the largest purchasers of a company’s products, and is entitled to take advantage of the discounts that its large buying power should command,” the complaint claims.

That is tough to do if the discounts given to most favored customers are never disclosed. The GSA is supposed to be a guarantor of best price, an arrangement that allows the government to purchase products and services without having to negotiate a new contract every time. Evidently, in this particular case, it wasn’t.

Result: Taxpayers “overpaid for each Oracle software product by the amount of discounts and reductions from other commercial pricing practices that should have applied to each such purchase.”

Oracle (ORCL) has not yet responded to a request for comment. If it does, I’ll update here.

Last week, I went to my hair salon and paid half of what I usually spend because of a deal that I—and more than 2,000 other people—bought online two months earlier. When I bought the deal, I suggested it (via email) to two friends, who each bought it and I was rewarded with two $10 credits. I used those to buy a deal at a local restaurant that gave me $40 toward food and drink for just $20. And the cycle continues.

Welcome to the world of group buying, Internet style, where the power of the Web can be utilized to offer surprisingly large discounts to a sizable number of people for things they actually want to buy.

Many of the group-buying sites work by negotiating deals with local merchants and promising to deliver crowds in exchange for discounts. The sites differ from other buying sites in how they work and what they do to reward users who share deals.

Several of these group-buying sites are available nationwide, mostly in big cities. I focused on Groupon.com, which is available in 42 cities, and LivingSocial.com, which works in 13 cities. Both are popular in Washington, D.C., where I live, though others may be more well-known in your area. If group-buying sites aren’t popular near you yet, they may soon start working there thanks to business models that allow them to work in all sorts of locations.

Other sites offer similar or slightly different selling techniques. Woot.com, a pioneer of group buying on the Web, started in 2004 by specializing in flash sales, selling a different item each day for just 24 hours or until it sells out. The site evolved from a wholesale distribution company and is known for its focus on selling technology gadgets. Another site called Tippr.com works in Seattle (not D.C., where I live, so I can’t yet use it) and uses a patented technology that makes discounts bigger as more people join a deal. New York-based Gilt.com and Ideeli.com focus on selling high fashion items at less expensive prices and can offer deals that last longer than a day.

Here’s how sites like Groupon and LivingSocial work: They ask retailers in a city to offer steep discounts ranging from around 50% to 90% off on things that would appeal to locals. Examples include 79% off spa services, 54% off at paintball, 57% off at a restaurant with Malaysian cuisine and half off for doggie day care. The site lists one retailer a day and takes a portion of the revenue generated by a deal. (Groupon usually takes half while LivingSocial takes between 30% to 50% depending on the arrangement with the merchant.)

Some sites, like Groupon, will only make the deal official if a certain number of people purchase it, while LivingSocial and others offer the deal regardless of how many people buy it.

People can be notified of these deals by signing up for daily emails from the site or by checking social networks like Twitter and Facebook. They may then purchase deals by logging onto the group-buying site and printing vouchers from the site. With most sites, you’re buying a deal for at least half off the real cost (i.e. paying $20 for $40 at a restaurant).

Both Groupon and LivingSocial will work with iPhone apps. Once downloaded, users can enter their login credentials into these apps so they can access that account’s purchased deals, allowing them to show the coupon on the iPhone at the establishment to get the deal.

Each deal comes with restrictions. For example, most of them expire within about six months or so (the date is printed on the coupon voucher and saved in your online account so you don’t forget). Some deals restrict the number of coupons per person, like the way my salon’s deal restricted people from buying more than three coupons; if three were purchased, they all had to be used in the same visit.

Since these sites work best when many people use them, they use a rewards system to motivate people to tell their friends about the deals they’ve bought. If someone shares Groupon with a friend using a special referral Web link, that friend must sign up for the site within 72 hours of clicking on the link. Then, when that person makes a purchase, the original sharer gets a kickback of $10 in Groupon credit to use toward future deals. This won’t work if the invitee isn’t a first-time Groupon customer.

LivingSocial’s rewards system works a little differently. If you buy a deal and share it with friends using a special Web link, you can get the deal free of charge if three friends use that link to sign up for the site and buy the deal. Separate from that, LivingSocial encourages users to invite friends to simply sign up for the site. If the invitee signs up, he or she gets $5 toward deals. If he or she purchases a deal, the original inviter also gets $5 toward deals.

Both Groupon and LivingSocial put a lot of emphasis on choosing deals that will serve as city guides to the hip and fun activities going on around town. Groupon divides some of its 42 cities into areas: For example, Washington, D.C., is divided into The District, Northern Virginia and Montgomery County—three unique zones that locals will appreciate seeing listed separately.

Not every deal is successful on group-buying sites. Groupon’s idea of selling tours of Gary, Ind., shortly after Michael Jackson’s death didn’t convince enough buyers to want to visit the King of Pop’s hometown. LivingSocial admits that some of its deals were too specific to be popular, like a dog-training class that didn’t fetch enough buyers. The site’s CEO Tim O’Shaughnessy says there might not have been enough people with new dogs at the time of the deal.

If you haven’t tried one of the many group-buying Web sites and you live in an area where they’re available, you’ll want to check them out—or find someone who already uses them to invite you so you can both get rewarded.

Edited by Walter S. Mossberg.

Write to Katherine Boehret at mossbergsolution@wsj.com

Buying in Numbers

With most group-buying Web sites, getting more people to buy into the deal gets you a better discount.

Will lousy brand awareness be Palm’s Waterloo? With weaker than expected launches of the Pre and Pixi at new carrier partner Verizon, it’s beginning to look like it.

Certainly, Palm’s leadership appears to believe that insufficient carrier support is largely to blame for its current woes. In an all-hands memo to employees yesterday (full text below), Palm CEO Jon Rubinstein said the company is taking some extraordinary measures to address unexpectedly weak sales for its handset lineup. To drive demand at Verizon and raise its customers’ apparently limited awareness of webOS, Palm (PALM) has initiated Project JumpStart, a sort of product evangelism outreach program.

“To accelerate sales, we initiated Project JumpStart nearly three weeks ago. Since then, nearly two hundred Palm Brand Ambassadors, supplemented by Palm employees from Sunnyvale, have been training Verizon (VZ) sales reps across the U.S. on our products. Early results from the stores have already shown improvement on product knowledge and sales week over week. You may have also seen a growing number of Palm ads on billboards, bus shelters, buses, and subway stations–all getting the word out about Palm.”

A wise move, particularly given reports that Verizon sales reps unfamiliar with Palm’s smartphones often opt to pitch more familiar devices like Motorola’s (MOT) Droid and RIM’s Blackberry to new customers. Additional in-store training should help drive sales volume, assuming Palm’s offerings are compelling and differentiated enough to withstand comparison with rival devices.

The question, of course: Are they? And while initial reviews of the Pre and webOS operating system suggested they were, it’s hard not to look at Palm’s current situation and conclude that they really might not be–particularly with new and impressive Android and Windows Phone 7 devices headed to market and Apple (AAPL) and Research in Motion (RIMM) both presumably working on refreshes of their iconic devices.

“Given the sizable discounts now prevalent on the Pixi, it now suggests that the real problems for the Pixi and the Pre go beyond insufficient carrier support and unfocused TV advertising campaigns,” CL King analyst Lawrence Harris observed in a research note to clients this morning. “Rather, consumers are not finding the Pixi a compelling product in an increasingly competitive smartphone market.”

If that’s truly the case, these Palm Brand Ambassadors the company is sending to Verizon (VZ) have their work cut out for them, at least at the moment. Sources close to Palm tell me the company plans to introduce at least one new smartphone this year. Perhaps that will be the device that drives demand and pushes the company back to profitability.

Team,

This morning we announced preliminary results for our 2010 third quarter. Since the quarter has not yet closed, it is too soon to offer exact numbers, but we stated that we expect to report revenues for Q3 between $300 and $320 million. We also announced that we expect our revenue for this fiscal year to fall below the guidance we gave to Wall Street, which ranged from $1.6 to $1.8 billion. As we mentioned in our press release, our softer than expected performance is due to slower than expected customer adoption of our products, which in turn has prompted our U.S. carrier partners to put additional orders on hold for the time being. On a positive note, we expect to exit the quarter with over $500 million in cash on our balance sheet. We’re scheduled to announce our full financial results in March.

I realize this news is difficult to swallow. We made this announcement today to prevent a surprise for Wall Street when we announce quarterly earnings in March. In the meantime, the entire executive team has been working extremely hard to improve product performance, and have implemented a number of initiatives to increase awareness and drive sales.

Dave Whalen and I just returned from a very successful meeting with Verizon Wireless, where they acknowledged that their execution of our launch was below expectations and recommitted to working with us to improve sales. To accelerate sales, we initiated Project JumpStart nearly three weeks ago. Since then, nearly two hundred Palm Brand Ambassadors, supplemented by Palm employees from Sunnyvale, have been training Verizon sales reps across the U.S. on our products. Early results from the stores have already shown improvement on product knowledge and sales week over week. You may have also seen a growing number of Palm ads on billboards, bus shelters, buses, and subway stations–all getting the word out about Palm.

All of these efforts are examples of how we are working to accelerate adoption and grow distribution of webOS. In the next few weeks, your management will work with you to make sure your priorities are laser-focused, primarily on helping to increase sales, improve product quality and differentiate the Palm product experience.

Our goals are taking longer than expected to achieve, but I am still confident that our talented team has what it takes to get the job done.

We’ll schedule an all-hands meeting after our earnings announcement in March, and I’ll be happy to answer your questions.

Go team!!!

jon

“The launch of Windows 7 has exceeded everyone’s expectations, storming ahead of Harry Potter and the Deathly Hallows as the biggest grossing pre-order product of all time at Amazon.co.uk,” Amazon’s Brian McBride told the Telegraph. “Demand is still going strong. Over the past three months, only Dan Brown’s The Lost Symbol has sold more copies than Windows 7, which is an incredible achievement for a software product.”

And an incredible achievement for Microsoft (MSFT), especially after that monument to disappointment, Windows Vista. Seems those early discounts and launch parties paid off. Well, maybe not the launch parties.

That’s how Intel describes the record $1.45 billion antitrust fine levied against it by the European Union, one the company evidently believes was meted out in error.

In an appeal filed with the European Court of First Instance, Intel asks that the European Commission’s antitrust ruling against it be annulled on the grounds that the EC failed “to meet the required standard of proof.”

Seems the chip giant feels the Commission’s analysis of its discounts and rebate programs was too shoddy to be trusted–especially when it’s being used as justification for the largest single penalty imposed on a company for antitrust breaches in Europe.

“The Commission fails to prove that Intel engaged in a long-term strategy to foreclose the competitors,” Intel (INTC) argues in its appeal. “Such a finding is not supported by the evidence and is impossible to reconcile with the fragmented nature of the Commission’s allegations (in relation to both products covered and time period) in respect of each Intel customer….The applicant also submits that all or part of the Decision should be annulled on the basis that the Commission infringed essential procedural requirements during the administrative procedure, which materially infringed Intel’s rights of defence.”

Clearly, former Intel general counsel Bruce Sewell, who left the company to take a job with Apple (AAPL) Tuesday, was busy right up until the time he packed up his desk.

Anyway, Intel asks the court to annul “whole or in part” the EC’s ruling and, barring that, to at least annul or reduce the fine imposed. Finally, it would also like to see the EC ordered to pay its legal expenses.

That’s how Intel describes the record $1.45 billion antitrust fine levied against it by the European Union, one the company evidently believes was meted out in error.

In an appeal filed with the European Court of First Instance, Intel asks that the European Commission’s antitrust ruling against it be annulled on the grounds that the EC failed “to meet the required standard of proof.”

Seems the chip giant feels the Commission’s analysis of its discounts and rebate programs was too shoddy to be trusted–especially when it’s being used as justification for the largest single penalty imposed on a company for antitrust breaches in Europe.

“The Commission fails to prove that Intel engaged in a long-term strategy to foreclose the competitors,” Intel (INTC) argues in its appeal. “Such a finding is not supported by the evidence and is impossible to reconcile with the fragmented nature of the Commission’s allegations (in relation to both products covered and time period) in respect of each Intel customer….The applicant also submits that all or part of the Decision should be annulled on the basis that the Commission infringed essential procedural requirements during the administrative procedure, which materially infringed Intel’s rights of defence.”

Clearly, former Intel general counsel Bruce Sewell, who left the company to take a job with Apple (AAPL) Tuesday, was busy right up until the time he packed up his desk.

Anyway, Intel asks the court to annul “whole or in part” the EC’s ruling and, barring that, to at least annul or reduce the fine imposed. Finally, it would also like to see the EC ordered to pay its legal expenses.

The Barclays analyst figures that Amazon will be generating some $700 million a year from the oversized Kindle by 2012. Overall, he says, the Kindle line will be a $3.7 billion business then.

I still think observers are underestimating the amount of effort it will take to get colleges–which move about as quickly as a DMV line at lunchtime–to adopt the Kindles. But let’s say the gadget does make headway with administrators and faculty. Who’s going to shell out $489 a pop for a gadget when that money could go to essentials—like beer.

For starters, let’s assume that the devices will see a big price drop in three years, just like every other consumer electronics device. It’s also possible that Amazon (AMZN) works out student discounts with college campuses in the same way that Apple (AAPL) used to many moons ago.

But even at $489, Anmuth argues, the Kindle DX would pay for itself in less than three years since it could (theoretically) save students $195 a year in textbook costs.

His math:

Of course, these numbers only work if you don’t have to replace your Kindle periodically because it falls victim to a beer bong or whatever else the kids are up to these days. But what do I know? I graduated from college in the pre-email days. Maybe the young people of today take exceptionally good care of their consumer electronics…