Unless you’ve been living under a rock for the past year, you will probably have heard of the new social phenomenon Groupon. Over the past few years, Groupon has added a new dimension to social commerce by bringing collective buying to the masses. Groupon offers big discounts on products and services, which only become valid after a pre-set number of consumers buy into them. If the predetermined minimum number of consumers isn’t met, no one gets the deal. Of course, the numbers required may change, as will the amount of discount you get but the principle remains the same; once enough people buy, the discount becomes active and everyone benefits. Consequently, consumers who take up the deal are encouraged to promote it to their friends to ensure that enough people buy, the deal is validated and they get their discount. Consumers get their big discounts and in return businesses generate new customers and hopefully have enough take-up to make their offer profitable.
Google tends to get things right when it comes to recognising a trend for the future, just look at Youtube. And if you don’t know just how powerful Groupon has become, the fact that Google is believed to have a $6 Billion offer for Groupon declined should be a sign that collective buying isn’t just an overnight gimmick, it’s only going to get bigger.
So perhaps with this in mind, in a move that looks to threaten the dominance of Groupon, Facebook “soft” launched its Daily Deal feature this week. The social networking giant has already been experimenting with “places deals” by offering discounts to individuals who “check-in” at locations, but Facebook Deals sees a more aggressive step towards commercialising the Facebook brand. With deals aimed more towards activities that people might like to do with friends, from paintballing to wine tasting.
As with Groupon, Facebook users will be presented with deals relevant to their location but they’ll be able to discuss and “like” them on Facebook before purchasing directly through Facebook’s Credits payment system with credit cards and PayPal. This is perhaps the most ominous element to the latest Facebook push as it could be, we’re seeing the first real focus on Facebook Credits, the super currency of the future and PayPals worst nightmare?
Before we get carried away Facebook deals are so far only covering a handful of US cities. However, given Facebook’s 500 million users and its huge distribution advantage over other sites like Groupon and LivingSocial it will surely only be a matter of time before their net widens to include the UK. Groupon has proven, in a short time, there’s a lot of money to be made from big discounts and Facebook’s new service is bound to get a substantial share of it.