Four months ago Facebook started up its new local business powered deals campaign in answer to Groupon, Living Social, and Google Deals. Their catch-phrase was “deals are better with friends.” But, apparently that isn’t the case, at least not for Facebook.
In an email earlier today to Reuters Facebook stated: “After testing Deals for four months, we’ve decided to end our Deals product in the coming weeks.” Of course the leader in the daily-deal industry, Groupon, hasn’t had it easy lately either. The problem could lie in the social deal business model –which seems to circumvent customer loyalty by forming a pack of deal hounds that only go to the deals. So local businesses that participate in the deals may be losing money, and so is Groupon. In 2010 Groupon met with a loss of $410 million, and from January to March of this year they’ve already managed to lose $103 million. But, these numbers come in spite of some very high operating expenses and over 180 million in online advertising. Facebook hasn’t been dishing out the same amount of funds for marketing however they aren’t featuring deals that have the same impact on customers or local businesses either.
Facebook’s move to pull out of the social deal industry doesn’t change much for them, whereas Groupon is in it all or nothing. I personally never used Facebook deals so I have no opinion of the service vs. Groupon. I’m thinking in the long-run this is probably a good thing for Facebook. Focus on what its good at and don’t get distracted by trying to take control of everything and making enemies of everyone. If Facebook was smart they would partner with the leaders in this and other spaces and monetize the hundreds of millions using their system daily.