January 19, 2011, 11:55 AM

Amazon’s first LivingSocial offer breaks records

Amazon’s first foray with LivingSocial exceeded 888,000 sales in less than ten hours.

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Daily deal site LivingSocial today launched a nationwide offer of a $20 gift card for $10 from Amazon.com Inc., No. 1 in the Internet Retailer Top 500 Guide, to each of its more than 170 markets.

The deal, which is available for 24 hours, sold more than 888,000 gift cards in less than ten hours after it was posted, making it the most-purchased daily deal offer ever. The deal surpasses Groupon’s most popular offer, Gap Inc.’s (No. 23) discount of $50 in Gap merchandise for $25. That offer sold more than 441,000 vouchers in August.

Moreover, as of 5 p.m. Eastern time today, more than 31,000 consumers had shared the LivingSocial offer on Facebook, which is a key part of the Groupon rival’s marketing strategy. LivingSocial aims to make its offers go viral by giving a consumer a free voucher if she refers three friends who buy an offer.

The deal marks the first clear sign of Amazon.com’s influence on LivingSocial since it announced a $175 million investment in the daily deal site in December.

“It’s unclear who is helping who here,” says Greg Sterling, an analyst and the founder of Sterling Market Intelligence. “It looks like Amazon is helping LivingSocial but the logic is also that once people are at Amazon, they’ll likely buy more than they anticipated—particularly because consumers have to spend $25 to receive free shipping. It’s a pretty smart calculation.”

The offer illustrates the embryonic nature of the daily deal industry, says Lou Kerner, vice president of equity research at Wedbush Securities.

“This shows how much opportunity there is for innovation,” he says. “If these sites can get someone of Amazon’s reach to participate they will get a large number of people to partake in an offer. Certainly Amazon will benefit as an investor in LivingSocial, but they also might attract new customers.”

Kerner says other large retailers should take notice of Amazon’s play.

“If I were another large retailer I would look to participate in one of these deals and maybe even leverage my large reach to acquire one of the daily deal competitors and help it grow the way Amazon is helping LivingSocial grow,” he says.

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