I didn’t get the point of LivingSocial’s viral promotion on Wednesday, though that didn’t stop me from participating.
Buying a $20 Amazon gift card for $10 is, essentially, like buying a $20 bill for $10. Someone offers you this deal; your first instinct is to look for a catch. Your second: to act on it before the idiot changes their mind. Your third: to tell all your friends about the money launderer changing tens for twenties down by the bus stop.
My friend Jim pointed me to a blog post that explained all. As soon as I read the words “LivingSocial, the deal-a-day site in which Amazon just invested $175 million,” the tension in my mind eased. Not that I had any problem taking Amazon’s money. But business decisions – marketing decisions especially – have to make some kind of sense to me, or my head starts to hurt.
The beauty of Wednesday’s promotion was that it took advantage of the second and third instincts outlined above to vastly swell Living Social’s user base and market buzz. They made no effort to promote it, aside from possibly their daily e-mails to subscribers (not being a subscriber before Wednesday, I can’t say for certain). And yet, for a mere $13 million out of Amazon’s pocket, they triggered awareness and action in exactly the segment they need to target – online, deal-seeking, social-media-active people.
Compare that to Groupon’s big marketing push: their pre-game ad buy in the upcoming Super Bowl. No word yet on how much they spent, but considering inventory during the game itself goes for $3 million a slot, I’ll bet they paid near $13MM or more. (They would have bought time during the game, but all the commercial slots sold out in October).
Groupon’s the apex predator in the daily-deals market right now. If they’re going to grow market share at all, they need to reach people who traditionally don’t buy online coupons. Super Bowl viewers certainly encompass that audience (among others).
So Groupon’s trying to grow their market, while Living Social’s trying to poach the existing market away. Someone with better business savvy than I can decode which is the winning strategy. I’m happy to just pick up some free ten dollar bills.