Facebook: Deals and Credits FTW

A Deal offer for Atlanta

A new York Times article announces the launch of Facebook Deals for five cities in the US: Atlanta, Austin, Dallas, San Diego and San Francisco. Deals will be easily shared with friends via email or wall posts and is going to potentially be free for merchants.  With an install base of 600 million members and 100 million mobile users (2010), Facebook is set to put a hurt on Groupon’s valuation.

From the NYT post:

“It will be easy to share deals with friends, see when a friend buys something and find offers that your friends are interested in, said Emily White, Facebook’s director for local. Facebook will focus on offers for things that are best done with friends, like concerts or events, she said. “You can receive Facebook deals via e-mail,” she said. “But if there is a deal that is good for you, it will likely show up in your news feed at some point in the day.”

Deals may well be a boost to another important Facebook program: Credits, the company’s virtual currency. Users will be able to buy Deals with a credit card or with Credits. Until now, Credits could only be used to buy virtual goods inside games and some digital products like movie rentals.

“It is first time it has been used to purchase a voucher that is redeemable for real goods,” Ms. White said. Facebook has made no secret of its plans to turn Credits into a major force in online payments.”

Facebook Deals overview

Techcrunch broke the story by digging into the NYT’s embargoed posts urls.  From Techcrunch: “Not surprisingly, the service will also focus on activities that are best done with friends — things like concerts and events. The deals can spread both via email and via the all-important News Feed.

That last bit will be the key if Facebook does hope to contend with Groupon and LivingSocial. They’ll have a huge amount of leverage right off the bat to the tune of 600 million+ potential eyeballs.

The other key? Facebook Credits. NYT quotes Facebook’s director of local Emily White as saying that Deals will be the first product that uses Credits for real goods (rather than virtual ones in games).

Also mentioned are initial partnerships with OpenTable, PopSugar City, Zozi and others.”

From RRW: They have a good break down of 6 features of the new offering, here is one.

The Number One Killer Feature of Facebook Deals: Structured, verified, meaningful demographic and taste data. You think the retailers with whom you redeem a Facebook Deal aren’t going to be shown your favorite music, TV show, your education level, some level of details about your friends and much more – at least in aggregate? You’re kidding yourself. That info is gold and it’s going to be the real killer for Facebook Deals.

Not just scale, not just the world’s greatest viral marketing platform – but valuable data about each and every customer that can then be used to retarget marketing efforts in the future. If Facebook can really deliver that well and at scale, it’s going to have a much, much more compelling platform for retailers than Pretending to Live Social or Grey Poupon. It’s going to be like your grocery store loyalty card, except it’s going to work across retailers and it will be filled with info as valid as you tell your Facebook friends. Note: While emailing us tonight, it’s notable that Facebook did not assert that this part was in any way incorrect.”

For merchants making Deals is a straightforward process.

Facebook Merchant Deals

From the Facebook merchant deal page:

Why offer a deal on Facebook?

Let our team work for you.
  • Reach new and existing customers. Over 500 million people already use Facebook.
  • Make it easy for people to recommend your business to their friends.
  • Get people to remember your business, not just a great discount.

And they have a quick start guide to help get things moving. (PDF) From the PDF:

Create unique social experiences for friends to enjoy together

People like doing things with friends. Use Deals on Facebook to offer people unique social experiences that they can share and enjoy together. Offering these experiences can bring more people to your business.

We’ll spread the word on Facebook when people interact with your deal. For example, we’ll tell people when their friends are interested in a deal they like, and when their friends purchase a deal. Showing people that their friends like your deal makes your business more relevant and noticeable.

Deals are a valuable new way to reach customers and build loyalty. Encourage people to share their excitement about the experience you’re providing, not just the discount you’re offering.”

Emily White, Facebook’s director for local

Facebook Credits

Facebook reps have been very careful to point out that the Credits program will not be available for direct purchase of real goods and services but instead would be used to purchase vouchers that can be redeemed for products. Techcrunch sites a response from the Facebook team: “You mention that Emily White says Deals will be the first product that uses Credits for real goods (rather than virtual ones in games). You can’t use Credits to directly buy real goods. You can use Credits to buy Deals, and you get a voucher that you can print out and take to the merchant to redeem your deal. But you can’t use Credits to actually buy a real good. Might be confusing to some people.”

Yeah, that might be confusing.  I am not sure what difference putting another step in the process makes.  You use Credits to buy a voucher that you exchange for a ticket at an event seems a little convoluted to me and seems to just be smoke and mirrors around the fact that Facebook Credits are going to be a global fiat currency at some point.

As RRW points out: “When beloved national retailers start offering goods and lower prices to customers who pay with a new, virtual currency – that’s when said virtual currency becomes a force to reckon with. Somebody call Congress and the Federal Reserve – it’s time to start having some serious conversations.”

More on Credits from Gigaom:

“The other interesting aspect to Facebook Deals is that it will make use of Facebook’s internal monetary system, Facebook Credits, becoming the first program to allow users to pay for real-world products and services. Until now, these credits — which amount to a billion-dollar economy within Facebook — could only be used to buy add-ons within social games and other digital features, such as movie rentals. There’s an intermediate step, however. According to White, credits will be used to buy a coupon or voucher, which can then be exchanged for the discount (possibly to avoid legal issues around using Facebook Credits as a real-world currency replacement).

As with most virtual currencies, the big benefit for Facebook with using credits is that it insulates users from the real cost of what they are buying — which is why retailers love to use things like Aeroplan points and other similar systems. And anyone used to playing social games on Facebook via Zynga and other similar services, which includes several hundred million people, is pretty used to paying for things using Facebook Credits. That could make paying for discounts and deals a lot more palatable for someone who might never give their credit card to Groupon.”

About Daniel Davenport

Daniel is a digital media executive with internet and broadcast experience. Daniel is currently the executive strategy director at THINK Interactive.

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