Facebook Deals launched today and many are saying it’s a Groupon-Killer.
- Facebook doesn’t have a sales force. Facebook launched in five cities for a reason: it couldn’t launch in more. Groupon has 3,000 sales people. Facebook as an entire company has 2,000 employees. While Facebook is aggregating from select partners, many of the deals up on the site now are Facebook deals which means they will be going after their own deals. To do that, they’re going to have build a huge sales force which they have never done and is not in their “DNA.”
- Companies won’t self-serve. To get high-quality deals, you need a sales-force. Companies don’t self-serve. Groupon Stores has largely struggled and Google isn’t even trying self-serve. So, while Facebook has many small businesses claiming pages, those businesses won’t easily submit high quality deals.
- Facebook isn’t a comprehensive source of deals. Even if Facebook did an amazing job with their deals, since they aren’t comprehensive, many users would use Facebook in addition to Groupon and LivingSocial. Ultimately, people care about deals and if Groupon and LivingSocial have deals Facebook doesn’t, they’ll still pay attention to Groupon and LivingSocial.
- Users don’t trust Facebook to recommend deals. To sell a user a deal, you need to have both business authority (is this a good business?) and deal authority (is this a good deal?). Business authority is easy to get by citing third-party reviews like Yelp (that’s what Groupon does). But, deal authority is harder. Groupon has it because consumers understand that they are being grouped together. Why should they trust a Facebook deal? Facebook recognises that they don’t have deal authority. So, many of their deals will fall flat. But, their hope is that a small percentage of its users are deal hungry and will do the work of figuring out if it’s a good deal. When they do, they’ll recommend the deals to their friends. So, Facebook is actually relying on friends to have business and deal authority
- Facebook recognises that they don’t have deal authority. So, many of their deals will fall flat. But, their hope is that a small percentage of its users are deal hungry and will do the work of figuring out if it’s a good deal. When they do, they’ll recommend the deals to their friends. So, Facebook is actually relying on friends to have business and deal authority
Facebook Won’t Kill Groupon, LivingSocial but It Will Hurt Them
Facebook deals will create some new challenges for Groupon and LivingSocial including:
- Inbox crowding. Facebook is now going to be sending deals to users. Groupon and LivingSocial, for most users, are the only companies sending daily deal emails. But, with Facebook (and Google), users are going to get more daily deal emails. That means Groupon and LivingSocial’s conversion rates will go down. Groupon and LivingSocial are learning the lesson that they don’t own the inbox.
- Facebook Newsfeed crowding. Groupon and LivingSocial rely on traffic from Facebook when users share deals on their Facebook walls. With Facebook deals, those shares will get competition from Facebook deal shares. That will cause Groupon and LivingSocial’s Facebook traffic to fall.
- Buying users from Facebook will be harder. Groupon and LivingSocial rely on Facebook to acquire significant number of new users via Facebook advertising. With Facebook pushing deals on Facebook itself, users may become less likely to click on those “50% off your city’s best stuff” ads on the right that Groupon and LivingSocial have been using to drive new users. If so, Groupon and LivingSocial will have to find new ways to acquire users.
Competition, that so many believed was coming, has finally come. It will now be up to Groupon and LivingSocial to innovate.
NOW WATCH: Tech Insider videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.