With Facebook Deals launching in the Bay Area on Tuesday, and Google (GOOG) planning to enter the Internet discount deals market here, the region will be an early battleground that may show how incumbent leaders Groupon and LivingSocial stack up against the world's biggest social network and its most popular search engine.
Facebook Deals launched Tuesday as a test product in the Bay Area and four other U.S. metro areas, but the Palo Alto social network says its version of merchant discount offers distributed
over the Internet differs from its competitors because it is designed to be "social from the ground up."
"We, with this product, are focused on the experience first and the discount second," Emily White, director of Local for Facebook, said in an interview. Some Facebook Deals will not even have a discount attached, White said.
Early Bay Area offers included $50 tickets to a San Jose Earthquakes game (down from $75) at Stanford Stadium in July where coupon holders get to meet members of the 1994 U.S. World Cup soccer team, paddleboard lessons in Santa Cruz and wine tasting in Mountain View.
"We've done Groupon in the past and we've done some of these other deal sites, and the thing that appealed to us with Facebook was that it was really an offer to be doing something around your friends," said Dave Kaval, president of the Earthquakes.
Facebook members must opt in to the service, but the News Feed for a large share of Facebook users ultimately will include a notification when a friend buys a deal or shares an offer. In fact, Facebook tells prospective business partners in a manual for the Deals product that it has eight options for merchants to broadcast their deal offers, including the News Feed, email and ads that run on the right side of a user's homepage.
Facebook is not disclosing the revenue split with businesses, although people familiar with the service said the merchant keeps a larger share than with Groupon. Facebook Deals will ultimately go national, but, White said, Facebook is focused on fine-tuning the service first. "We really want to get the product right, and then launch it everywhere."
Less is known about Google's discount deals product. It will be called Google Offers, with a minimum 50 percent discount from the market price. Google Offers will launch first in Portland, Ore., where the Mountain View Internet company has already begun running ads for the service, followed by the Bay Area and New York City.
Analysts say Facebook, and potentially Google, could pose a potent threat to Chicago-based Groupon, in part because of the vast amount of information Facebook and Google have about their users, data that could be used to target deal offers. Facebook also benefits from its 600 million-member network, "a trust-filtered network" where people may pay more attention to a deal offer, said Michael Fauscette, an analyst who follows social media companies for the research firm IDC. He said Facebook's service stands out because of its focus on social experiences.
"That could be pretty powerful because that's not really how the other guys have approached it," Fauscette said. "I think it's got to be something of a threat (to Groupon and other online discounters), but I don't think this is one of those winner-take-all scenarios."
Fauscette is less optimistic about efforts by Google, which tried to buy both Groupon and Yelp, and has tapped rising star Marissa Mayer to lead development of its own product. But not everyone agrees. Google Offers could be integrated into search and the map-based product Google Places, so a search for "pizza" might produce not only a map of pizzerias, but a map of those with the best discounts.
"I think Google could be a strong second in this race," said Jason Hennessey, CEO of Eversparkinteractive.com, an Atlanta search optimization company.
It's unclear what the entry of giants like Google and Facebook will mean for smaller online deal providers.
This newspaper has an online digital deal broker, GotDailyDeals.com, and Jeff Herr, vice president, digital for the California Newspapers Partnership that publishes 34 daily newspapers in the state, said there is a place for local providers.
"It's easy for a business operator to get into a very bad place by doing a Daily Deal that is not well conceived," Herr said in an email. "We live here. Our team is local. And we have for years worked hard to help our neighbors with advertising strategy. That is unique to what we bring to our clients."
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