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Facebook Deals Get the Ax

Four months ago, Facebook started up its new local business-powered deals campaign in answer to Groupon, Living Social, and Google Deals.  Their catchphrase 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 think, in the long-run, this is probably a good thing for Facebook. Focus on what it’s good at, and don’t get distracted by trying to take control of everything and making enemies of everyone. If Facebook were smart, they would partner with the leaders in this and other spaces and monetize the hundreds of millions using their system daily.

2 Comments

2 Comments

  1. Nora

    August 30, 2011 at 10:07 am

    I think this is too bad. I thought a lot of people were interested in using Facebook Deals with their friends through the social networking site.

    • MrGroove

      August 30, 2011 at 3:39 pm

      I’ve never used the deals personally in Facebook so I can’t really speak to it. I personally think this is a chance however for them to focus on FACEBOOK and partner with Groupon perhaps or Google for a piece of the action.

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