Facebook Enters Coupon Arena

On Tuesday, Facebook introduced Facebook Deals, its answer to online coupon source Groupon. Deals leverages Facebook’s 600 million users, letting individuals share, comment on, and purchase deals directly from Facebook. The service will roll out in Atlanta, San Francisco, Austin, Dallas, and San Diego this week.

Deals competes with the likes of Groupon and LivingSocial for consumers’ cash, but the Facebook backbone gives extra strength to this online coupon service. Facebook has had Facebook Credits (a virtual currency system in which one dollar buys ten Facebook Credits) up and running for some time, but until now, the closest a user could get to purchasing a real-life product was a movie rental. Now users can purchase online discounts using Facebook Credits, which accepts credit card and PayPal payments.

Recently, a professor at Rice University published a paper claiming that more than 30% of businesses reported losing money as a result of a Groupon promotion. In most cases, Groupon takes more than half the sticker price of the deal, but depending on the specific offer by a business, results may vary. As Facebook Deals hits the market, will the competition lower the Groupon and LivingSocial margins in favor of higher profits for businesses and lower prices for consumers?

Author: John Carew

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