Facebook Is Latest Rival to Groupon and LivingSocial
Facebook said late Monday that it would introduce Deals, an effort by the social networking giant to tap into the consumer frenzy over online discounts. With Deals, which had long been expected, Facebook is entering a crowded market led …
Context & Ripple Effects
Facebook's Deals launch is the endpoint of a six-month build-out: it started with a Places-powered check-in deals service in October 2010, began listing third-party deals directly on the site in February, and by March was reported to be testing a local deals subscription offering. A December 2010 e-commerce drive framed the broader ambition — turning the network into a transaction layer, not just a referral one.
The move lands a week after Groupon bought Pelago, maker of the Whrrl check-in app, to head up product development — evidence that the daily-deals leaders were already racing to add the location and social graph features that are Facebook's home turf.
First-order effects
- Groupon and LivingSocial now compete against a rival with roughly 700 million users who can surface discounts in the feed for free, while they must buy their audience through marketing.
- Local merchants gain a second major distribution channel overnight, giving them negotiating leverage on commission terms when they run their next deal.
Second-order effects
- Deal aggregators and email-list publishers that resold Groupon inventory get squeezed from both ends, as Facebook can bundle offers with Credits and its own social sharing instead of paying intermediaries.
- Groupon's Pelago acquisition signals the forced response: the deals leaders have to acquire or build social-location capability rather than rely on email blasts, raising their cost base just as margins come under pressure.
Third-order effects
- If distribution keeps beating curation, the daily deal stops being a standalone business and becomes a feature of platforms with built-in audiences — the same pattern playing out across group buying and check-in services alike.
- Merchants' growing ability to route around dedicated deal sites points toward local commerce consolidating around whoever owns the customer relationship, with regulators' eventual attention to advertising practices a live question if the market concentrates further.
The trend: Daily deals are shifting from standalone destinations like Groupon and LivingSocial into features bolted onto social platforms whose scale lets them reach buyers without buying them.