Amazon sends a signal that it intends to play in the local daily deal market.

While analysts await confirmation of rumors that Google Inc. will acquire Groupon, the  daily deal site’s principal rival LivingSocial announced yesterday that it secured a $175 million investment from Inc. LivingSocial also announced it raised $8 million from venture capital firm Lightspeed Venture Partners. 

LivingSocial says it generates revenue of more than $1 million a day on average. It says it expects its 2011 revenue will surpass $500 million., No. 1 in the Internet Retailer Top 500 Guide, investing in LivingSocial is a clear sign the world’s largest online retailer intends to become a bigger player in both online daily deals as well as in local commerce, says Colin Sebastian, an analyst for Lazard Capital Markets who covers e-commerce stocks.

“The move escalates the emerging competitive battle between Amazon and Google, which itself is becoming a major force driving online shopping,” Sebastian says.

LivingSocial last week generated 8% of U.S. visits to 81 group buying sites, according to Experian Hitwise, a web measurement firm. That ranked LivingSocial second to Groupon, which accounted for 79% of those visits.


Amazon’s investment shows that the online retail giant recognizes LivingSocial’s potential to gain market share, says Bill Tancer, Hitwise general manager, globla research. One reason for that is that 6.3% of consumers visiting LivingSocial are what Hitwise data considers to be young cosmopolitans, a demographic group that is one of the strongest early adopter segments. 

“If early adopters are showing up at LivingSocial it suggests that there might be something there that LivingSocial is doing that will enable it to establish itself as the main alternative to Groupon,” says Tancer.

And, with Amazon’s backing, the site could quickly find a platform in which it could gain market share, he says.

LivingSocial says it plans to use the funding to enter additional markets in the U.S., Canada and abroad.

The daily deal site also announced yesterday that it has entered eight new U.S. markets, including Des Moines, IA, Little Rock, AR, and Syracuse, NY. LivingSocial now offers online deals in 121 markets in the U.S., Canada, United Kingdom, Ireland and Australia and has more than 10 million subscribers.