Facebook Deals: A More Powerful Platform for Small Business?

Last Updated Apr 26, 2011 8:01 PM EDT

The daily deal space got a little more interesting yesterday with the launch of Deals on Facebook in five markets: San Francisco, San Diego, Atlanta, Dallas, and Austin. Members who live in those cities now get access to daily local discounts which they can buy, "like," or share, automatically launching the deal into their newsfeeds. Expect more cities to be added to the list, probably before you finish reading this post.

This is the second iteration of Facebook's "deal" product; the first was launched late last year and was linked to mobile check-ins with local merchants (think Foursquare). The new product more closely resembles the daily deals we've come to know and love from Groupon and Living Social. With the daily deals market estimated at nearly $4 billion by 2015 in the U.S. alone, I don't think that Facebook's entry into the market is going to have a huge impact on the industry leaders; there's room enough for more than one big player here. But I do think it's likely to open up more opportunities for small, local companies to experiment with daily deals.

Unlike Groupon and LivingSocial, Facebook claims that its primary customer isn't consumers trolling for deep discounts on, say, jeans from the Gap. The offerings are geared toward a social mindset, so they're largely for events that people attend in groups, such as a whitewater rafting trip, a private dinner party for 20 guests, or a paddleboard class. You're unlikely to find offerings for, say, microdermabrasion or teeth whitening; and discounts may not be as deep as the other daily deal sites offer. Users can pay for deals with a credit card or with Facebook Credits, the company's virtual currency which until now has been of little use in the real world.

What I like best about Facebook Deals is that it partners with smaller daily deals companies that might otherwise be gobbled up or steamrolled by the big players in the industry. These companies already have salespeople on the ground who cultivate relationships with local businesses that may be looking for a way to redirect their marketing efforts online but haven't yet gotten their feet wet. So far, there are 11 local partners:

  • aDealio
  • Gilt City
  • HomeRun
  • OpenTable
  • PopSugar City
  • Tippr
  • kgb Deals
  • ReachLocal
  • zozi
  • Plum District
  • Viagogo
"We've been working with Facebook over the last several months," says Rich Razgaitis, general manager of ReachDeals, whose parent company, ReachLocal, is partnering with Facebook Deals. "Our model is predicated on having an exceptional local presence, so we're a perfect fit for Facebook."

While Groupon and LivingSocial build subscribers through advertising with publishers and then migrate users to their own sites, Facebook Deals allow users to buy and share deals where they socialize, Razgaitis says. "With Facebook, deals are totally integrated into the genotype of the types of consumers that would be best paired up to merchants," he explains. "It's a tighter nucleus of consumers, and the monetary benefit that small business gets as a result of that is significant." Razgaitis says that response to Facebook Deals from his company's existing small business customers has been "fantastic."

Of course, both Facebook and its partners will take a cut of every daily deal. And if you're a small business owner who wants to hop on the program, you'll have to create a Facebook page since every deal links to fan page that's e-commerce enabled. That, of course, positions Facebook not only as a place where an increasing number of small business owners interact with their customers, but where goods are bought and sold. "They definitely have multiple goals," says Greg Sterling, of Sterling Market Intelligence, a consulting and research firm. "If they get a bunch of credit card numbers, there's a lot they can do, like one-click purchasing. That's very powerful, especially in a mobile context. They can start selling anything."

What do you think of Facebook Deals? As a small business owner, will you try it out when the program is offered in your area?

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