Make no mistake about it, there’s a war happening in the daily deal industry between Groupon and LivingSocial.

In the beginning of January, Groupon was riding high, fresh from the Google acquisition rumors and at 45 million subscribers, triple their nearest competitor, LivingSocial. By the end of January, Groupon had added another 5 million subscribers, 11% growth, crossing over the 50 million mark.

Groupon has grown its user base by aggressively focusing on highly measurable online ad buying via Facebook and Google. They closely watch how much it costs to acquire a user and how well that user performs.

A Super Bowl ad completely goes against this strategy.

There’s no testing here. It’s a huge, $3 million, one-time ad buy with little understanding of how that will convert in terms of users and whether those users will purchase deals.

So, why did Groupon make a last minute Super Bowl ad buy?

• LivingSocial had a huge January. They ran an amazon.com gift certificate deal that sold 1.16 million deals, out-selling Groupon’s now famous Gap deal. The effect of the deal was that LivingSocial added 5 million subscribers, representing a 33% growth compared to Groupon’s 11% growth in January.
• Consumer loyalty questioned. Even more worrisome to Groupon is that the amazon.com deal proved what many predicted: consumers aren’t loyal to one daily deal service and will happily chase a good deal on a new service
• LivingSocial bought pre-game Super Bowl ad. Despite LivingSocial saying they had no intentions to run a Super Bowl ad back in January, they bought a last minute pre-game Super Bowl ad. Groupon, not wanting to be compared to LivingSocial, felt like they needed to step-up and buy an ad during the game
• Groupon trying to cement “groupon” as the word for daily deals. All of Groupon’s ads were careful not to mention using a daily deal or group buying, the actors in the ad only talk about using a “groupon.com”
• Show they care about small businesses. While only having 30 seconds, Groupon was careful to mention a specific small business in each of their ads

With Groupon and LivingSocial fiercely competing with each other, more of America and the world is learning about the concept of daily deals which should help smaller daily deal sites, daily deal aggregators, and other companies operating in segments of the daily deal industry.

Will be interesting to see how LivingSocial and Groupon continue to outdo each other.

Post by Vinicius Vacanti, co-founder of Yipit.com