Yesterday around 1:20pm, I succumbed to the maelstrom of social media wonderment and became the 645,773rd person to buy $20 in Amazon merchandise for $10. I reacted much like I'm sure you did -- "it's a no-brainer!" I will use the proceeds to buy a book or two for my wife on our Kindle.
I thought I'd share some additional thoughts on the guest post Mashable was so gracious to post -- it is the second time they've done so for me.
Quick administrative note/disclaimer first... posts for places like Mashable have to be a little edgy and controversial to get shared, commented on, mentioned, and read. The end product was a little different than my original thoughts. They always are. :-)
And the Mashable team changed the title... the focus of the article was really more about why the LivingSocial-Amazon deal is really the beginning of Social Commerce 2.0. No worries.
Now, to elaborate.
First of all, what a clever way for Amazon to maximize the value of their investment. I don't know the terms of the revenue split between LivingSocial and Amazon, but I imagine this was part of the plan all along. Amazon makes an investment & sets aside a little extra money to cover a planned group purchase. They use the strength of the Amazon brand among consumers to create a no-brainer deal that would help both LivingSocial and Amazon acquire new customers. They made the amount of the transaction high enough for people to share & care, but not so high that it was a total loss for Amazon, which runs a pretty tight ship as it is.
LivingSocial gets inexpensive customer acquisition and tons of new accounts. Amazon uses its strength in the marketplace to dramatically increase the value of its investment. Everybody plays, everybody wins. It was *brilliantly* executed by all involved.
As CEO of a company in the social commerce space, I can tell you that this very much fits in to the broader picture of trends we are seeing with group purchasing and social commerce:
1. The increasingly crowded group purchasing landscape has made it tougher for the various competitors to attract the top local advertisers in almost every market. Consistent deal quality has suffered tremendously. So there are more tanning beds, teeth cleanings, and acupuncturists -- and all of them are more "niche" businesses that are by definition less interesting to the mass market of consumers.
2. Group purchasing has therefore gotten less effective at the local level, and leading providers are now seeking top national/international brands to do group purchasing deals (e.g. Gap, Amazon, etc.). Late entrants have struggled as, well, they're late to the game. Margins shrink for all the "technology providers." Advertisers aren't as happy and are getting pitched frequently as sales pressure intensifies on group purchasing providers.
3. However, consumers still respond to group purchasing as long as the quality of the deal is very, very high. The Amazons/Gaps/best restaurants/best retailers of the world do a lot better than your aforementioned neighborhood acupuncturist. So group purchasing (as it has been defined thus far) is less special and looks more like any other marketing tactic with every passing day. i.e. if you are running marketing for an established and/or successful entity, you're at a huge advantage over someone who isn't.
4. Despite what a deal like this may make you believe, consumers have *no* loyalty to individual group purchasing providers today. Consumers just want to save a buck at places where they know they'll shop anyway. The Gap and Amazon were successful because of who they are, not because of the plumbing (Groupon and LivingSocial) that allowed people to buy gift cards.
5. Brand/corporate advertisers and their agencies can effectively run these types of campaigns themselves and they will as they get more savvy. They'll also do so for the cost savings. The technology is there for companies to take matters into their own hands. Most have captive audiences already in Facebook pages and e-mail lists, among other assets. All you need is a great deal to offer and the right social commerce middleware (which we have - yes I can say that because you're on my blog).
6. Ergo, brands and people with big audiences ultimately get more and more competitive with time, and they win in the end. It may take ten years, or it may take two.
Whether we're talking with big, recognizable brands, major media companies, or major companies, it's all the same. Inertia is out. Action is are in. Audiences are again the key. Technology helps major players tap into the audiences.
And most importantly, this LivingSocial/Amazon deal just higlights that there is no brand affinity in "deals". Consumers will go where they can save money at places where they want to spend money. The company to scale this capability wins and becomes Groupon 2.0.
It will be a very interesting 2011 as this next phase of social commerce begins to shake out.