After Groupon launched its daily, group coupon meets social networking deal site in 2008, competitors quickly followed. Soon enough there were LivingSocial, Dealster, Homerun, Travelzoo and even Google, among others. Then last year Amazon announced that it was getting behind the deal-of-the-day idea with AmazonLocal. At first it was only available inBoise, which seemed hardly a threat to the daily deal marketplace. However, by now dozens of cities are in on the deal. At its launch, the idea that AmazonLocal was using LivingSocial’s sales force rather than create its own seemed odd. But now everything has changed, and just last week AmazonLocal sold a million gift cards in 17 hours. The deal was that customers could buy a ten dollar gift card for just five dollars. Not since LivingSocial sold a million Whole Foods coupons in 14 hours did a daily deal cause such a stir.
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In a glass-half-empty world, Amazon technically lost five dollars on each of the one million AmazonLocal deals. On the other hand, some industry insiders contend that it costs about five dollars to sign up each new subscriber. Other statistics indicate that the cost of signing up new customers has steadily grown over the past two years, and the figure could actually be as high as $23. Meanwhile, discussions on the issue of daily deals continue. Is the market oversaturated? Is the idea losing steam? Is it a good thing for all businesses? Not all answers are known, but for a retailer such as Amazon, redeeming the gift cards doesn’t present the same challenges as say, redeeming certificates for massage therapy at a small business. So ultimately each company should carefully weigh the factors before signing up. Estimates are that between 10 and 30 percent of deal coupons are never redeemed.