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.
Considering hundreds of daily deal sites out in the wild, deal aggregators are going to win this battle pretty soon even without the affiliate income. Aggregators definitely create more value than standalone daily deal sites.