Facebook Launches 'Deals on Facebook,' Promises a More Social Experience Than Groupon

Move Could Translate to Monetization Strategy for Social Net That Doesn't Involve Ads

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Facebook today launched a test of its full-scale Deals on Facebook site -- not to be confused with Check-in Deals announced during SXSW in March -- in Atlanta, Austin, Dallas, San Diego and San Francisco and plans to expand to other cities. It's no surprise: A few months ago Facebook users in the test cities were asked to sign up for the service with an ad inserted into the news feed.

Facebook wants to differentiate itself from the pack by offering deals that are meant to be shared and experienced with the user's social circle.
Facebook wants to differentiate itself from the pack by offering deals that are meant to be shared and experienced with the user's social circle.

Facebook Deals is a formidable competitor for Groupon and LivingSocial, but it's not alone: Google launched Google Offers last week, but rolled it out only in four cities. Groupon rejected a reported $5 billion offer from Google last year.

If Facebook does Deals right, this move can mean a significant monetization strategy for the social network that isn't based solely on advertising, though it appears that companies may be able to pay for sponsored deal units. And consumers' hunger for discounts appears to be growing by the minute -- BAI/Kelsey Group estimates the deals market will reach $3.9 billion by 2015.

Facebook wants to differentiate itself from the pack by offering deals that are meant to be shared and experienced with the user's social circle.

"While many Deals on Facebook offer discounts, it's more important to us that you find interesting experiences around you to do with friends," Emily White, director of local at Facebook, said in a blog post, promising no teeth-cleaning discounts, because that's a solitary experience. Many of the deals on Facebook will include additional discounts if the user can rope in friends to take that sky diving lesson as a group. Obviously, sharing and posting and inviting is easier on Facebook than on Groupon or any of the other group-deals services -- family and friends are often already on Facebook and don't need to sign up for an extra service.

And because it's Facebook, it gets special offers that may not be for sale regularly anywhere, like an "All Access Experience" for concerts that gives users backstage passes, sound check access and a catered dinner in addition to tickets to the show. Facebook deals can be accessed through daily notifications or through the Deals tab on the home page, which only appears if users list one of the five test cities as their "current location" on the Facebook profile. Of course, if your friends choose to share the deals they got, you'll see it in the news feed as well as in the description of the deal, which states "Your friend purchased this deal."

Facebook has its own sales staff, but is also working with the deals sites that they partnered with for Check-in Deals: Opentable, Gilt City, Tippr, PopSugar, Plum District, ReachLocal, Zozi, Home Run, KGB Deals, aDealio and ViaGoGo.

Facebook is planning to include credits as a payment option along with credit cards, so those users who have been saving their credits for that new farm equipment in "FarmVille" or a new gun in "MafiaWars" can now buy real stuff for their real lives -- at a discount. It's not clear whether Facebook will take the usual 30% cut for a credits transaction in Deals.

Other deal companies take a substantial revenue split merchants, with Groupon keeping 50% for itself and LivingSocial keeping 40%, but Facebook is keeping that number to itself.

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