Moving to counter Google (NSDQ: GOOG), which is widely expected to soon announce a deal to purchase Groupon, Amazon.com (NSDQ: AMZN) has just invested $175 million in Groupon rival LivingSocial. LivingSocial, which has ties to AOL (NYSE: AOL) founder Steve Case, is the second largest player in the daily deals market, and is reportedly on track to report “well over” $500 million in revenue next year. Groupon’s revenue, by contrast, is expected to be three times that much in 2011.
The investment by Amazon will allow the company to share in the future growth of the daily deals market without having to rush into a market that is arguably only tangential to its core e-commerce business. It also gets to avoid a major cash outlay. Amazon had roughly $6 billion in cash at the end of last quarter. Google, which is expected to spend as much as $6 billion for Groupon, has more than $33 billion.
To date, Amazon’s participation in what are arguably the fastest-growing online commerce markets — daily deals and private sales — has been minimal, although the company did recently purchase Woot, a site that offers one steeply discounted product for sale each day.
For LivingSocial, which currently offers daily deals in 120 cities, the investment will allow it to continue its rapid expansion. The company initially started out as a social app developer but has been focused primarily on the daily deals market for the last year. It recently purchased Urban Escapes, a company which organizes week-end excursions for young professionals, in part to offer unique deals that would help it differentiate from competitors.
In addition to Amazon, previous LivingSocial backer Lightspeed Venture Partners is putting another $8 million into the company. That will bring LivingSocial’s total funding to date to $232 million. The company’s other venture capital backers include U.S. Venture Partners and Grotech Ventures.
Case and his wife, Jean, as well as his Revolution LLC investment firm, are also investors. The company is led by Tim O’Shaughnessy who previously led the consumer products team at Case’s Revolution Health and also managed product launches at AOL.
Here’s the full release:
LivingSocial (www.livingsocial.com) has secured a $175 million investment from Amazon. LivingSocial has also secured an additional $8 million investment from Lightspeed Venture Partners. LivingSocial will use this investment to maintain a steady drumbeat of worldwide launches and overall business growth while continuing to serve more than 10 million subscribers across the U.S., Canada, UK, Ireland and Australia in more than 120 locations. Because of LivingSocial’s rapid expansion, the company is currently booking revenues of more than $1 million a day on average and is projected to book well over $500 million in revenue in 2011.
“To be the biggest player in the local commerce space there is no one better to work with than Amazon,” said Tim O’Shaughnessy, CEO of LivingSocial. “As the social shopping space continues to heat up, LivingSocial is committed to staying focused on providing the high level of quality that consumers and merchants have come to expect when working with us.”
As the online source to find amazing experiences at an unbeatable value, LivingSocial lets anyone experience the hottest restaurants, shops, activities and services in their area. The company has dedicated area experts on the ground in every location working directly with business owners, and constantly researching the best in local adventures to bring a savings of 50% to 70% for consumers.
Recently, LivingSocial expanded its business by acquiring adventure company Urban Escapes, and launching three new verticals including LivingSocial Family Edition, Campus Deals and LivingSocial Escapes, a travel site that offers unbeatable savings on curated adventures. In addition, the company continues a regular flow of launches – on average one per day – and has expanded its reach in Australia with a controlling stake in Jump On It, making it live in five countries.