Facebook Jumps on Local Deals Bandwagon

By Apr 27, 2011, 11:33 AM Author's Blog  

Facebook Jumps on Local Deals BandwagonAs we have been saying for a while now there are 2 “bubbles” building in internet 2.0 – social media (Chinese or American) and “group buying”.  Of course there is a rational debate about whether we are in the “1997″ area of said bubble or “1999″, but the hallmarks are remarkably similar to what we saw in 1995-1999.  One of the latest indicators is a whole swarm of “me too” companies joining in one or the other of these 2 mega themes.  It will all be fun and games for the stocks as speculators flood in… until one day it is not.   But as Cramer said the other week, play it until the music stops since these type of moves tend to go much farther than anyone anticipates.  Just understand what Kool Aid you are drinking….

After the dust settles there will generally just be a few of the bigger companies (or first movers) standing.  In group buying of course Groupon and Living Social are the big 2; but in recent weeks both Google (GOOG) and Facebook (earlier this week) announced they are entering the game.  You might recall Google attempted to buy Groupon late last year.  The Facebook foray is interesting in that there is obviously a social aspect already built in, and a 500M user base is something to contend it.  If both Facebook and Groupon were public, one would think the news of the Facebook entry into the market would have pushed the stock of Facebook up, and Groupon down – but based on the stage of fervor we are in, I bet both companies would have surged.  (I am using the 1999 era as my template)  Of course there are only so many customers, with disposable income, that need to be on so many mailing lists, that need so much conspicuous consumption.  Heck we may already be hitting the first wall if web traffic is an indicator.

  • Traffic to flash sales and daily deal sites has been dropping over the past few months, according to online traffic monitor comScore…..Groupon has fallen off 13% during the same time period.
  • “It’s kind of like social networking,” he said. “At one point everyone was trying to build a social network, but there can be some overkill. A normal individual is not willing to be part of 10 networks.”

So this area will get saturated as any other, and there can only be so many winners in a space – but we’re not at that stage of the fervor yet.  A lot of the “me too” companies will be dust in the wind in 3-5 years.
But as I said above, the Facebook entry is intriguing (especially the potential use of “Credits”) so let’s see what the buzz is on the internets (sic)

Via Time blog:

  • Today, Facebook is launching a social flash deals service simply called Facebook Deals in five test cities: Atlanta, Austin, Dallas, San Diego, and San Francisco.  On the one hand, the service is basically yet another of the hundreds of Groupon copycats, amounting to more daily deal overkill. On the other, Facebook’s tweaks and innovations could revolutionize the deals market, and wind up way bigger than Groupon, BuyWithMe, LivingSocial, Google Offers, or any other of the many wheeler dealers out there.
  • ……if Facebook is good at anything, it’s the social-connecting part, and while many daily deals sites have been trying to somehow make offers seem social, they’re pretty much just promotions to get people to buy something they wouldn’t have otherwise — and they typically have little to do with socializing or sharing.
  • Facebook Deals instead promises that its promos will truly make the concept of social deals a reality. “We’re building a product that is social from the ground up,” says Emily White, director of local for Facebook. “All of these deals are things you want to do with friends, so no teeth whitening, but yes to river rafting.”
  • Facebook Deals can show up in your e-mail in-box if that’s what you want, but they’ll also appear in your news feed—and of course, friends can share deals with each other, and in some cases, they’ll get an additional discount for doing so. Through incentives like these, and habits already ingrained in folks who use social media 24/7, these deals seem apt to spread like wildfire.
  • Perhaps an even bigger advance comes via a new payment system for deals. Sure, you can use a credit card. But at some point in the near future, the plan is that Facebook Deals can also be paid for with Credits, Facebook’s virtual currency. Thus far, Credits are useful (useless?) pretty much only for virtual goods purchased in the course of online games. Soon, Credits can be turned in to buy vouchers for winery tours, river rafting trips, and the like.
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