Mobile technology may be a "game-changer" for the daily deal industry, according to LivingSocial's CEO.
Chief executive Tim O'Shaughnessy said the company was investing in the area although he was cautious about how successful the company may be in this area.
"There's great potential in this space. Whether we get it right remains to be seen," O'Shaughnessy said.
The daily deal industry, which offers big online discounts from local businesses, has exploded in the past year.
Groupon, the largest company in the space, filed for a $750 million initial public offering earlier this year.
LivingSocial, part owned by Amazon.com, is also planning to go public.
Most daily offers are currently sent to subscribers via email, however, the boom in smartphones means more deals may be distributed instantly based on people's locations.
Earlier this month, LivingSocial and other daily deal companies including Gilt City and BuyWithMe, partnered with social network Foursquare, which has more than 10 million members willing to share their locations.
The partnership lets LivingSocial distribute its daily deals to Foursquare users.
However, LivingSocial also runs instant deals, which are much quicker offers focused on smaller areas, currently in parts of New York City, Washington, D.C., and San Francisco.
The combination of instant deals and real-time location information from mobile phones "is a potential game-changing opportunity," O'Shaughnessy said.
"It solves a problem for consumers and merchants in a different way to daily deals."
Local merchants such as restaurants will be able to fill empty seats quickly by turning on instant deals that reach consumers' close by through their phones, he explained.
This approach will work best in urban areas where there is a high concentration of businesses and people.
In midtown Manhattan, LivingSocial has signed up about 160 merchants for its instant deals.
"We're driving substantive amounts of business to all sorts of merchants," O'Shaughnessy said.
"We're live in three markets and have sold about 100,000 instant deals at this point."
Still, Martin Tobias, chief executive of Tippr, which runs a daily deal software platform that helps other companies compete with Groupon and LivingSocial, reckons location-based instant deals may not catch on.
It will be difficult to source enough discount deals to make this approach work in lots of areas, he said.
Consumers may not be that interested in such offers, he added.
"On our network Thursday is the biggest day for deals because people are planning for the weekend," Tobias said.
"Few people are searching for something right now. If they are walking around, they're probably already heading somewhere to do something and may not be want to be diverted."
Still, the Tippr CEO said mobile technology is crucial for the daily deal industry in another way.
Of all the deals offered through Tippr's platform, 42 per cent of them are opened on a mobile phone, he noted.
"That's a giant number," Tobias said. "If you don't have a purchase experience that's optimized for mobile buying you're going to miss a lot of sales."