In its second-largest acquisition, Amazon buys the company for $970 million.
The offering initially focuses on Atlanta, Austin, Dallas, San Diego and San Francisco.
Facebook Inc. has officially entered the daily-deal arena, a nascent industry that could generate up to $2.67 billion in sales in 2011, according to a recent report by Local Offer Network Inc., which sells advertising and technology services to group-buying sites.
The social network’s offering, called Deals on Facebook, is initially focused in five markets—Austin, TX, Atlanta, Dallas, San Diego and San Francisco.
The social network says its program will focus on social experiences to distinguish its Deals program from potential competitors such as Google, Groupon and LivingSocial. For instance, a consumer in Austin can buy an “All Access Experience” for an Austin City Limits Live concert that provides backstage passes for two, as well as sound check access and a catered dinner in addition to tickets for the show.
To foster what it calls social discovery—that is, one consumer learning about something via Facebook’s newsfeed, the first page a consumer sees when logging on to Facebook.com—consumers can Like the offer, Share the offer with a select group of friends via Facebook Messages or buy the offer. Facebook will highlight in the news feed if a consumer Likes, Shares, or buys the deal for himself or a friend.
Consumers who click the “Get Deals Updates” button on the social network will also have offers sent to their e-mail addresses.
Shoppers will be able to buy daily-deal vouchers sourced via Facebook, as well as from nine other retailers that will offer a mixture of deals they promote on their own e-commerce sites and Facebook-exclusive offers. Those offers will come from Gilt Groupe’s Gilt City, Home Run, OpenTable, Pop Sugar City, KGB Deals, Plum District, Tippr, Reach Local and Zozi. When a consumer views an offer sourced from one of the other sites, Facebook makes that clear by highlighting “Provided By” on the page highlighting the promotion.
Facebook is using its own back-end payments system to handle Deals, and consumers can pay for Deals using Facebook Credits, PayPal, American Express, Visa, MasterCard, Discover and JCB.
While the daily deal space is burgeoning, it is still at an embryonic state, says Lou Kerner, vice president of equity research at Wedbush Securities. “We’re at the starting line of a race that we believe will have four players—Google, Groupon, LivingSocial and Facebook,” he says. “They each have the resources and focus that make it hard to imagine them not being major players in the space.”
Facebook, he says, will likely differentiate its offering by becoming a self-service platform where local merchants can sign up and offer their own deals. That’s not unlike how the social network allows businesses to buy targeted Marketplace ads, which appear on one of four slots on the right side of a Facebook page under “People You May Know.”
To avoid confusion, Facebook has rebranded its other Deals program as Check-In Deals. That program uses a feature within Facebook’s mobile app to enable businesses to offer deals to consumers who check in through Facebook Places.