Amazon.com (Nasdaq: AMZN) is getting in on the social coupon fun.

The leading online retailer is investing $175 million for an undisclosed stake in LivingSocial. As the distant second-place runner in a niche that Groupon dominates, LivingSocial cranks out daily deals for eateries, spas, and leisurely outings.

Amazon's press release claims that LivingSocial is booking revenue of more than $1 million a day on average, and targeting $500 million in revenue next year. It's not entirely clear if LivingSocial is referring to gross revenue -- the amount it collects from the buyer before handing over roughly half of the proceeds to the deal sponsor -- or net revenue.

Either way, Groupon is probably doing a lot better than the $500 million a year in revenue that's being bandied about. Internet traffic watcher Hitwise reports this week that Groupon is generating nearly 10 times the traffic of LivingSocial.

The margins are likely unreal in this space, so why is LivingSocial raising money as Groupon's board presumably entertains a buyout offer from Google?

Well, it could be that these viral deal pioneers fear the inevitable influx of well-backed competitors. AOL, OpenTable (Nasdaq: OPEN), Travelzoo (Nasdaq: TZOO), The Knot (Nasdaq: KNOT), and Yelp have all thrown their hats in the ring in recent months.

Proceeds can also go a long way toward expansion. LivingSocial is already cranking out new verticals. It has rolled out a travel deals portal called LivingSocial Escapes and is trying to populate a family friendly edition. Last month, it announced that it was teaming up with Koofers to offer Campus Deals geared for students at 10 different colleges.

This isn't the first time Amazon is buying into the daily deals space. It acquired Woot.com this summer, but that site is national. LivingSocial, Groupon, BuyWithMe, and the growing pool of clones target local deals from area merchants.

Yes, even Amazon is going brick-and-mortar these days -- but it's making sure that it does it with a dot-com bent.

Should Amazon have bought all of LivingSocial or is a stake enough to kick the tires? Share your thoughts in the comment box below.

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