Now that there is a full-fledged backlash against online coupon services, Facebook has jumped on the bandwagon. Today it launched the imaginatively titled "Deals" service in five test markets: San Francisco, Atlanta, Austin, Dallas and San Diego. Sorry, snowbelt, you'll just have to wait.
Facebook's move comes as Groupon-wannabes, of varying levels of
quality, are flooding the market, and as many local businesses are beginning
to question the wisdom of making use of such services. Last week,
Google announced its own service, the imaginatively titled "Offers," after failing to woo Groupon for a reported $6 billion last year.
Facebook, though, has a distinct advantage going in: it's a network -- and a huge one at that.
The online-coupon biz relies heavily on network
effects: the value of the service grows along with the number of people
using it. Facebook's half-billion-strong customer base has already been
amassed, so now it's just a matter of delivering the goods. Google -- not
to mention the hundreds of other recent market entrants -- has to
essentially build its network from the ground up (Google has a big
advantage with its Gmail service, but the social element is missing).
Another difference: Facebook's Deals service won't be relying so
heavily on deep discounts - something many local merchants find
offputting about, for example, Groupon's service. The idea is to attract
new customers, but if the cost of granting heavy discounts exceeds the
revenue gains (which it often does) there's little point in
participating. Similarly, if existing customers use coupons, the net
benefit gain is zero.
Facebook will offer discounts, but the main thrust
is the "social" aspect of "Deals." Most offers will be for services that
people use in groups, such as dining, movies, and sporting events.
It should be interesting to see what happens to the relationships
Facebook has with Groupon and LivingSocial, another coupon provider.
Both services use Facebook as channels for their offers and, more to the
point, both are big advertisers on Facebook.
With the introduction of "Deals," Facebook -- for the first time -- will
allow users to spend Facebook credits on real-world purchases. Before
now, credits, which are paid for with a credit card (that is, legal
tender), were used only within the service, for games and the like (for
example, for bored housewives in Peoria to buy manure in Farmville, or
Now that users can spend credits on coupon deals, Facebook,
by having its own currency, is one step closer to what is, obviously, its
ultimate goal: nationhood.
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