LivingSocial, thesecond-biggest daily deal company behind Groupon, is cutting deal aggregators out of its affiliate program starting tomorrow
Living Social, like most daily deal sites, has a program for rewarding third-parties that refer them new subscribers. That won't change, but starting tomorrow, pure aggregators like Yipit and Dealsurf will be excluded, according to an email from LivingSocial sent to relevant companies.
Affiliate fees are the major source of revenue for aggregators (to the extent that they have established their revenue models). Up until now, LivingSocial offered some of the most generous commissions.
Why would LivingSocial cut off a source of new customers? A few reasons:
- The aggregators are a potential source of competition. Right now, they are all tiny compared to LivingSocial and Groupon, but new miniature Groupon clones are starting up every day, so the potential value of these aggregators is very real.
- Aggregators compete for the same users in the same channels as the companies they aggregate. A source at an aggregator says LivingSocial explained to them that it didn't want its money reinvested in bids on the very keywords LivingSocial advertises against.
- The pure-play Groupon clone race is over. When LivingSocial still had to establish itself as the clear number two behind Groupon, it made sense to throw money at any possible source of users. At this point, the next-biggest pure-play daily deal companies are a tenth LivingSocial's size, and don't look like a threat. Any new competition will come from different but related business models -- like the aggregators.
We've reached out to LivingSocial for comment. Here's the email sent out yesterday:
As of Friday, January 7th, 2011, the LivingSocial Affiliate program will discontinue its relationship with all daily deal aggregators (any website that features a collection of daily deals as its primary content). LivingSocial has determined that your site falls into this category, meaning you will lose access to affiliates.livingsocial.com at the aforementioned time; all remaining payments will be processed in mid-February.
If you feel that your site has been inappropriately labeled, feel free to reply to this email. Otherwise, please respect that this decision is final.