Today, Facebook has launched its daily deals service in Atlanta, Austin, Dallas, San Diego, and San Francisco. The unveiling comes less than a week after Google's entrance into the group-buying space but is receiving a lot more hype than its Mountain View competitor. That's because with its 600-million strong user base, Facebook Deals could quickly become the go-to destination for daily discounts, siphoning away attention from Groupon and LivingSocial. Here's what makes the new service a bigger threat than the other Groupon imitators:
- It doesn't just leverage its vast database of email addresses. Sure, offers will appear in your inbox but they'll also appear in your Faecbook News Feed, interwoven into the site's ecosystem. “A lot of deal sites get that deals are social,” a Facebook spokeswoman tells the New York Times. “But I wouldn’t say they are really well integrated with Facebook.” You can bet that this one will be.
- It could be free for retailers. "Existing Daily Deals services make their money by charging retailers a cut from every discounted transaction," explains Marshall Kirkpatrick at Read Write Web. "At least in Europe, Facebook Deals offered deals for free. Free! The giant social network could scale like crazy doing that, and then make its money when people decide to make their purchases with Facebook Credits. It's a Walmart-style move, but Groupon isn't as lovable as the Mom 'n' Pop corner store."
- It harnesses social consumerism. Facebook Deals will focus more heavily on deals that work better for groups, like concert tickets and other live events. Faceook users will be able to "Like" deals before or after they buy them, broadcasting that deal to their friend network. To coordinate ticket-buying in groups, Facebook allows you to invited friends to deal, as shown below:
- It avoids the one-night stand. The frustrating thing about LivingSocial and Groupon from a retailer's point of view is that many customers see a hot deal, act on it and never visit the business again. Facebook's trying to avoid that by connecting deals with businesses' Facebook Pages. "With Facebook Social Deals local merchants can direct new customers to Like them on their Page and — voilà — they have a CRM [Customer Relations Management] platform," writes Greg Sterling at Search Engine Land. "Merchants can then potentially start a 'conversation' with these new customers."
- Word-of-mouth check-ins. The platform could really take off if deals are linked to check-ins, writes Kirkpatrick. "Facebook probably has the biggest check-in network in the world," explains Kirkpatrick. "Millions of people publicly declare their locations to friends on Facebook already. Tie that in to Deals... and you're so golden it's ridiculous." He imagines a network effect where users are constantly boasting about their deals, giving free advertising to the retailers (e.g. "I was at the Starbucks in the mall with these 3 of my friends and we all got a coupon on a fappacino because I checked them in with me").
Of course, execution is everything and there are a number of ways Facebook could mess this up. One challenge, as Pascal-Emmanuel Gobry at Business Insider points out, is going to be evolving its corporate culture. "Group buying services rely on curation, with humans picking attractive deals, and huge salesforces and, more generally, a sales-driven culture," he writes. "This is a far cry from the engineering-driven culture at Facebook (and Google, which is also working on its own group buying service), where they like that stuff to be done by computers as much as possible."