Facebook backs away from social deals
After only four months in the market, Facebook has decided to cease the operations of its group discount offer, Social Deals.
According to an email sent to Reuters by the social networking giant, the decision was made, "to end our Deals product in the coming weeks".
The product in question was similar in nature to those offered by firms such as Groupon, Cudo and LivingSocial.
Businesses that participated in Facebook Social deals were required to have a registered fan page on the networking site before their deals would be emailed to customers.
No official reason was given as to why Facebook made the decision to pull the plug on Social Deals, but one key factor may have been the commoditisation of the group-buying phenomenon.
As more competition enters the marketplace, the leading way for firms to differentiate their group-purchase deals from the competition is through price – leading to lower profits across the board.
Jeremiah Owyang, partner at research firm Altimeter Group, asserts: "The Groupon group buying phenomenon is a commodity. There are no barriers to entry. It's just not going to work because everybody offers it and therefore the margins go down."
However, companies making use of Facebook campaigns that focus on driving consumer engagement through discovery may be pleased to know that the social network is still interested in the area.
The social network explained: "We think there is a lot of power in a social approach to driving people into local businesses. We've learned a lot from our test and we’ll continue to evaluate how to best serve local businesses."
As an example, the Check-In feature is being kept alive by Facebook, at least for the time being.
It is similar to Foursquare in that users who check in to venues through GPS-enabled smartphones can gain access to special deals.