LivingSocial Deals, Groupon Make Coupons a Social Experience

Groupon and LivingSocial are trying to make it easier for people to save money by making it easy to share and earn coupons with friends. Although they are not the only companies specializing in coupons or money-saving deals on Facebook or the iTunes app store, both have raised funding in the last couple of months, both are busy expanding to new cities — and both making good use of social features.

Their web sites use Facebook Connect to help people find deals that may interest them by geography, then share these deals on Facebook or other social media. Groupon does this better with a prominent “Share this Deal” button at the top of the offer, whereas LivingSocial’s “Deals” service requires the user to select Facebook from a cumbersome drop-down menu to do the same thing — but LivingSocial also encourages socializing by giving you a free deal if three of your friends buy the same deal as you.

In either case, sharing the deal on a user’s Facebook Wall places the deal in that user’s news feed, allowing everyone in their network to see it and make comments, like, etc.

While other coupon-centric pages exist on Facebook and on the Internet, what Groupon and LivingSocial seem to do that’s different is convert the desire to save money into a social media experience that users can share not only with their friends, but with their Facebook network.

Take SmartCouponDeals.com’s Facebook Page, for example.

With more than 4,000 fans, frequent coupon postings for a variety of consumer products on the Wall, plus an unlimited service for which the member-based web site charges $5, the Page definitely provides savings, but other than gathering people who are already interested in saving money on the same Facebook page, there’s nothing social about it.

Then there are iPhone apps like Yowza, FourSquare, MobiQpons or Coupon Sherpa that provide coupons or deal directly to peoples’ phones — oftentimes employing a personal component, such as listing the deals nearest to your geographic location.

But, again, Groupon and LivingSocial Deals take that social component to the next level through Facebook Connect, potentially inviting a user’s entire Facebook network to get in on the deal.

Groupon started in November of 2008 in Chicago and currently has almost 47,000 monthly active users on Facebook, has sold more than 1.5 million Groupons worth almost $73 million dollars. These deals are offered in almost 50 mostly U.S. cities across the country, but also in Vancouver, Toronto, London and more locations are to come. It has also been running Facebook ads in at least some of these cities, we’ve noticed.

The basic process works like this: Groupon offers one deal each day then if you and enough of your friends sign up, the deal comes through and your credit card is charged. Groupon uses “collective buying power” to set up discounts at restaurants, bars, gyms, etc. Groupon takes 30-50% of each deal.

The company is on track to a $100 million revenue run rate, and raised a $30 million second round of funding led by Accel Partners (a big Facebook investor).

LivingSocial Deals just launched in Austin, Texas and invites people to deals through Facebook Connect, a free iPhone app and their web site to save 50% off or more at restaurants, spas, sporting events, hotels and other places. Headquartered in Washington, D.C., Deals launched last summer and says it has since saved users there more than $1 million with the company’s offers. Besides Austin and D.C., the company is also live in New York City, Boston, Atlanta, Seattle and San Francisco.

Purchasing on Deals is similar to Groupon: buy the deal and share it (if three of your friends buy the deal, you get one free), if enough people opt for the deal it makes and you redeem your coupon for the discount. The company has gone through a big evolution, having first gotten traction on Facebook many months ago by offering a simple app that let people share lists of interests. The app also took full advantage of the Facebook news feed at the time, which at one point made it the largest app on Facebook.

It also, notably, raised a second round of $5 million earlier this month from Grotech Ventures and angel investors including Steve Case.

Coupons are big during recessions like this one and, as it happens, so is Facebook and other social media services. These companies’ social strategies have helped make them poised to see more traffic and revenue growth.