NEW YORK (AdAge.com) -- In the space of 24 hours, Living Social established itself as a formidable competitor to Groupon.
In what appears to be a calculated marketing move, the daily-deals site began selling $20 Amazon gift cards for $10 yesterday morning. (Amazon invested $175 million in the site last month.) By early this morning, more than 1.3 million gift cards, at a price tag of more than $13 million, had been sold. That figure eclipses the much discussed Gap Groupon offer from August, which let users buy a $50 credit for $25. That deal sold 441,000 units for more than $11 million. In many ways, the Gap deal also put Groupon on the map, establishing it as a presence for national, not only local, advertisers and adding 750,000 subscribers to its network.
"The group-buying trend has definitely made some waves in the cross-channel retail market, and there's definitely room for more than one source of it," said Larry Joseloff, VP-content at Shop.org, a division of the National Retail Federation.
Added, Jeffrey Grau, principal analyst at E-Marketer, "Seeing Living Social can deliver the volume of takers on a deal like this, certainly they are now in the same league as Groupon."
The deal received plenty of press and likely gave the site's subscriber base a massive boost. Living Social and Amazon did not respond to requests for comment.
Amazon and Living Social's "fates are intertwined," said Mr. Grau. "The deal seems like a way for Amazon to protect its investment and ensure Living Social is on the map."
Key to Living Social's success is the power of social media in spreading deals. The site makes it easy to share deals via Facebook, Twitter and email and incentives to consumers, promising the deal for free, if three people buy the same deal, based on a referral. Yesterday, Facebook exploded with the deal. Ultimately, more than 45,000 shared the deal via the social-networking site.
Living Social's marketing via word-of-mouth is in contrast to Groupon's plans to begin advertising in traditional media. Groupon has purchased time during the Super Bowl pregame and has been quietly tapping a variety of agencies to handle various marketing duties.
Mr. Joseloff said it's probably a good thing that the two dominant players are taking different approaches to marketing. He pointed to the flash-sale trend, populated by sites like Gilt, Ideeli, HauteLook and RueLaLa, which is now beginning to attract retailers determined to launch their own flash sales. "Group buying could follow the same path," he said. "So anything [Groupon and Living Social] can do now to differentiate themselves is great."