Facebook Launches 'Deals' Discount Service, Competes with Groupon

April 26, 2011 -- Facebook's answer to discount and coupon sites like Groupon and LivingSocial launches in five U.S. cities today. Users in San Diego, San Francisco, Atlanta, Dallas and Austin, will be able to find Facebook "Deals" on everything from concerts to kayaking as part of the company's initial test. Facebook says it hopes to expand the service to other cities in the future.

The world's biggest social network will try to leverage its more than 600 million users to stake a claim in the multi-billion-dollar discount industry. To put Facebook's size in perspective, the current leader in the field, Groupon, has 70 million members.

Groupon was reported to have rejected a $6 billion takeover offer from Google last December.

"We believe this is a win for the consumer in the end. Facebook has the best opportunity to take advantage of Facebook," said Jascha Kayakas-Wolff, Vice President of Marketing at Involver, a company that develops social marketing tools. "I don't see this as a play that is going to take the other guys out of business."

The online discount industry has exploded over the past few years, becoming one of the hottest and fastest-growing business sectors in the world. The sites and offers work in a variety of ways. Some offer better deals if one gets one's friends to buy in too, others require that a minimum number of people purchase a deal before it is available. Many offers come with no strings attached.

Although there are numerous variations on the Web, the business models are similar. The sites work primarily with local establishments. Companies from The New York Times to AT&T are starting their own discount services.

The websites brokering the deals make money by taking a percentage of the sales. The businesses offering the discounts hope to benefit from new customers and increased exposure. Facebook won't disclose the commission it is taking and says it hopes to make the discount landscape more social.

"We're building a product that is social from the ground up," said Emily White, director of local for Facebook. "All of these deals are things you want to do with friends, so no teeth whitening, but yes to river rafting."

Facebook has partnered with 11 companies that already provide deals elsewhere on the Web to populate its new service. The company is working with OpenTable, Gilt City, ViaGoGo and eight others.

Facebook says users are not only able to purchase things at a discount, but are also able to buy unique experiences like behind-the-scenes tours and backstage passes.

Offers on Facebook will be available for between one and seven days and users can access them through the "Deals" tab, a daily email and postings from friends.

In August, Facebook released a geo-location service similar to Foursquare that offered deals when users "checked in" at certain businesses.

The Associated Press contributed to this report .