Posted to Volacci's blog on April 26th, 2011

Can Facebook Beat Groupon with Facebook Deals?

Facebook just launched Facebook Deals, a daily deal part of their site that will compete directly with sites like Groupon and LivingSocial. With it's 600 million users and it's deep pockets the question is "Can Facebook beat Groupon?"

Sure they can. Here's why.

Groupon has 10% the user base Facebook has while Facebook has 10% of the World's Population.

That's really freaking big. Don't believe me? If Facebook was a country it would be the third largest country in the world. Twice the size of the United States. Just imagine one day Facebook might have it's own GDP and it's starting with Facebook Deals.

Facebook's a Platform for the Social Web

As we moved from the Web 1.0 era where we had AOL and Yahoo and into the Web 2.0 where we have Facebook and Google these properties are becoming synonymous with the internet. Users turn to them to check up on their friends, check in to businesses, keep in touch with relatives and now, to purchase daily deals.

User information

Facebook gathers a lot of user information that Groupon doesn't. For instance, they not only know your age and location but who you associate with, what products and services you like, where you go through out the day, where you shop, what you watch, what you read, everything! They can use this data to offer special deals that are unique to their users. Imagine one day you "like" the fan page for Pizza and tomorrow you receive a Facebook Deal for ta-da, Mom and Pops Deep Dish Pizza!

Unlimited Advertising/Promotions

All that stuff in your News Feed is free game, free ad space. Facebook can and will use that space to push it's daily deals. They already have. For instance, this morning when I logged in above my News Feed was an invite which not only allowed me to subscribe to Facebook Deals but to invite my friends too. The News Feed is very important to Facebook Deals success. Imagine for a sec if you updated your status asking your friends where to look for new shoes and Facebook follows up your post with an ad for Zappos. You'd click. You know you would.

Businesses Are Already On Facebook

Groupon's large sales staff and overhead will cost the startup dearly. The reason they have a sales staff at all is because they still have to reach out to businesses about their product. Facebook on the other hand has business owners coming to them. Currently there are over 1.5 Business Fan Pages on Facebook and with over 600+ Million potential fans the reach is unfathomable.

Facebook Credits

With FB Credits Facebook can hold onto your money until you decide to buy something. In theory, they're becoming a bank for it's user. They can then turn around and use that money to expand Facebook Deals.

It's not all doom and gloom for Groupon. By having Facebook jump into the Daily Deals race it helps validate the business model and will incentivize competitors to innovate. With Google lurking in the background it might even increase the valuation of Groupon as they look to buy their way into this market.