Amazon Taps LivingSocial to Enter Daily Deals Space — For Now

Amazon has begun its steady march into the daily deals business by tapping the expertise of LivingSocial, the second-largest provider in the space behind Groupon.

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, 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.”

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I think the NSA has a job to do and we need the NSA. But as (physicist) Robert Oppenheimer said, “When you see something that is technically sweet, you go ahead and do it and argue about what to do about it only after you’ve had your technical success. That is the way it was with the atomic bomb.”

— Phil Zimmerman, PGP inventor and Silent Circle co-founder, in an interview with Om Malik