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article imageFacebook launches Groupon competitor with 'Deals' platform

By Chris Hogg     Nov 3, 2010 in Internet
At a press conference at its head office today, Facebook announced a new Deals platform that allows local merchants to target and offer deals to Facebook users. The new platform could prove to be big competition for social-buying giant Groupon.
The Deals platform is built around Facebook's Places feature. It allows users to find specials around them, and it allows merchants to offer specials to drive more business, without paying Facebook a dime.
The Deals platform allows users to launch Facebook on their mobile and search for deals available around them, see what deals their friends have purchased, and see what deals are being offered by businesses they "like."
Deals can range from everything to discounts at restaurants, to clothing stores, to coffee shops and more. Once a user finds a deal they want, they can go into the store and claim the discount.
Facebook says its Deals product is designed to solve an age-old problem of getting local businesses online. The company says local businesses have been told for years they should be online, but local business owners don't always see the value. Facebook says its platform provides a reason to be online, as it allows merchants to turn fans and visitors into "real people, real dollars and real experiences."
On the merchant side, Facebook says the deal set-up process is simple: Merchants visit a single page where they can specify two lines of text to describe a deal, when it expires and how many deals are offered.
Four types of deals are available: Individual deals, loyalty deals, friend deals and charity deals. Individual deals target an individual user; loyalty deals offer incentive to get users to come back often (for example, offering a free coffee if the user buys two at previous visits); friend deals to offer incentive to get users to bring in large groups (for example, offering a group of four people a discount at a restaurant); and charity deals.
Self-serve deals are coming to all companies on Facebook in the near future. For today's launch announcement, Facebook is partnersing with The Gap, which will give away 10,000 pairs of bluejeans to people who check-in at a Gap store.
Facebook's Deals feature is available in the United States and will be rolled out in other regions later.
By adding a social business layer to its Places product, Facebook is likely to attract businesses who currently use social buying tools such as Groupon. The big difference, however, is that deals from Facebook could be more inexpensive for retailers.
"To be clear, we don't get paid for the deals," said Facebook CEO, Mark Zuckerberg, at the press conference. "They're user value and value to the businesses. If a business wants, they can also advertise on the ad system we've had for years. For now, the whole premise is this is something great for people who are using this system. Check in, tag three of your friends and everyone gets a free ice-cream. That's good. That hasn't been done before."
Facebook offering deals without taking a cut of the margins could put a huge dent in sales from competing deal-maker Groupon.
Groupon is currently the leading deal-of-the-day site that offers group discounts on everything from spa services to restaurant deals to discounts at major retailers. Deals are offered to members by email and through social media.
Groupon, a two-year-old startup out of Chicago, is the fastest-growing company in Web history, generating more than $500 million in revenue this year, according to Forbes. Valued at $1.35 billion, Groupon has seen competitors and copy-cat sites crop up in markets all over the world in an effort to cash-in on the group-buying craze.
Unlike Facebook's new Deals feature, however, Groupon takes a cut of all revenue generated from daily deals. So if a user buys a coupon for something via Groupon, the retailer gets a percentage and Groupon takes a percentage.
With Facebook's Deals feature, the retailer could offer the same service without having to lose any of its margin to a partner. The merchant could also benefit by being visible to a user's entire friend feed on Facebook, and by being able to target people who are physically close to them.
A Facebook blog post lists other potential Deals coming to the U.S. in the near future.
More about Facebook, Deals, Groupon, Social buying
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