9/14

The End of Facebook Deals

Daily deal sites on the internet have been multiplying exponentially, aided by practically no barriers of entry. But now, small start-ups and major players alike can take a collective sigh of relief. After a 4-month stint in a handful of test markets, Facebook has announced the end of its Deals program. Facebook Deals were intended to compete with daily deal giants such as Groupon and Living Social, but Facebook has decided to kill the program and focus attention elsewhere. However, Facebook will continue to provide “Check-in” deals. Facebook for businesses adapts swiftly, so let’s take a moment to understand the differences between these options:

Facebook Deals was a coupon program that offered a small number of deals at local merchants. Similar to Groupon and Living Social, the deals were substantial; at least 50% off, but would appear for only a day at a time.

Check-in Deals allows for local businesses to promote a deal when Facebook users “Check-in” with their smartphones. (Facebook is suggesting that I check in at Geovanti’s in Champaign, IL for a free chicken strip.)

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I was surprised to hear the news about the cancellation of Facebook deals. I was convinced that targeted and segmented promotions along with a vast social network of prudent deal hunters was going to be a winning combination. I imagined seeing a good local deal pop up on my newsfeed every day, such as  – “Steve just bought a 2 for 1 pass to the movies! Click here to see the current Facebook Deal!” I also pictured users haphazardly sharing Facebook Deals on their friends’ walls. Unfortunately for Facebook, that never happened and it’s back to the drawing board to try to capture some of the daily deal market share.

To understand why Deals didn’t work for Facebook, we have to take a look at the inherent structure of the competing organizations. Facebook has over 2,000 employees, however that pales in comparison to the over 3,000 members of sales staff at Groupon. Without a significant sales force aggressively targeting small business nationwide, Facebook couldn’t compete with the quantity and quality of deals that Groupon could offer. Groupon also has an email list over 80 million strong, full of people who asked for daily deals delivered to their inbox.

With no more Deals on Facebook, brand and business pages are still very much alive. In a statement by a Facebook spokesperson to Reuters, “We think there is a lot of power in a social approach to driving people into local businesses. We remain committed to building products to help local businesses connect with people, like Ads, Pages, Sponsored Stories, and Check-in Deals. We’ve learned a lot from our test and we’ll continue to evaluate how to best serve local businesses.”

Deals are dead on Facebook, but that paves the way for new, innovative ways for businesses to reach their targets. As always, strong engagement and an attractive fan page are crucial for brand awareness, but Facebook will have to come up with another way to generate end sales. The social approach to shopping is clearly powerful, and it will be exciting to see how the largest social network responds.