Facebook stepped up its marketing efforts recently for its new group-buying feature Deals. Users have seen home page ads asking them to invite their friends to subscribe to news feed and email notifications about Deals. Meanwhile, Page admins have received location-customized emails from Facebook explaining that Deals could help them acquire more customers in their city. Facebook needs to build large subscriber and provider-bases to prime the service for an explosive formal launch.
On March 15th, Facebook soft-launched Deals, showing news feed stories asking users to sign up to hear about local pre-paid group experiences they could have with friends. The service, which lets users purchase packages such as a luxury winery tour for $50, uses the same name previously reserved for Facebook’s location-based Places checkin rewards system, now call Checkin Deals.
By serving updates directly to the news feed, Facebook Deals has an advantage over Groupon, LivingSocial, and other daily deals providers who spend millions on Facebook ads in order to collect email sign ups and alert users to new offers. But Facebook is late to join the race and needs to build a subscriber-base from zero. In contrast, Groupon said it expected to have over 25 million subscribers by the end of 2010, and some sources say it has as many as 40 million worldwide.
Luckily, Facebook has a captive audience of over 500 million users to draw from, as well as control over the communication channels that reach them. Facebook can serve ads encouraging sign-ups, like the one shown above, in unused premium ad inventory on its home page. It can also manipulate its news feed algorithm EdgeRank to give stories about friends signing up for Deals high visibility in the feed in order to drive more subscriptions — something it appears to already be doing.
Meanwhile, Facebook needs to register as many local business as possible in the five launch cities so it can pick and choose which Deals to serve. If it can launch the service with highly compelling, valuable social Deals that users are eager to buy and share with friends, user signups and merchants will come flooding in and the service will be a success. However, if first the Deals are insignificant discounts on boring experiences, users and business alike could write off the service.
The marketing emails Facebook sent out include localized information. For instance, since I’m an admin of Pages registered in San Francisco, the email I received stated “Try Deals and get more customers faster than ever. In San Francisco alone, you could reach 3,500,000 people on Facebook.” It also touted the service’s lack of upfront costs, its ability to build loyalty, and that Facebook will assist with marketing efforts.
Facebook is preemptively addressing the chicken-and-egg problem of whether subscribers or providers come first by aggressively recruiting both. There’s no official launch date for Deals, so Facebook can hold off until it has the critical mass necessary to seriously challenged the established players in the group buying market.