Getting to the Bottom of LivingSocial’s Aggregator Snub

LivingSocial created a stir when an e-mail circulated from the group buying site informing deal-a-day aggregators that they would be dropped as affiliates. However, as 8coupons cofounder Landy Ung and The Dealmap CEO Jennifer Dulski reminded the ILM:10 audience last month, not all aggregators are created equal. As such, they are not all being treated equally by LivingSocial.

Pure daily deal aggregators — those featuring “a collection of daily deals as its primary content” (via the e-mail) — will be excluded. These include Yipit and Dealsurf, as reported. Others, including 8coupons and The Dealmap, will continue as active LivingSocial affiliates, taking a share of revenues for referring customers. Both companies serve an array of offers beyond just daily deals, meaning less head butting with destination sites.

There are several plausible reasons for why LivingSocial would selectively pull the plug. While Dulski and Ung stressed at ILM that aggregators play a complementary, and not a competitive, role in the larger deals ecosystem, those that barter singularly in DOD could pose a threat. As pure-play aggregators build their e-mail lists, some subscribers may be tempted to abandon the swarm of destination sites and simply hook on with an offer network. In those cases, 8coupons’ Matt Moskowitz told BIA/Kelsey that “LivingSocial doesn’t want to subsidize their entire business model.”

Also, some aggregators bid for and buy Google AdWords and other SEM campaigns for LivingSocial keywords. Essentially, Moskowitz said, they are “making money from LivingSocial, then reinvesting it to compete with them.”

With new deal-a-day sites surfacing constantly (several hundred now) and more white-label providers recruiting publishers to “get in the game,” the noise level will only rise. As a result, the role of the aggregator becomes more pronounced. For second tier and niche sites, having access to an aggregator’s network is crucial. For top dogs such as Groupon and LivingSocial, the competitive tension heightens.