Facebook Deals Threatens Google Places, Foursquare, Gowalla

By Clint Boulton  |  Posted 2010-11-04

Facebook Deals Threatens Google Places, Foursquare, Gowalla

Facebook isn't lavishing kisses on Foursquare, Gowalla, Google or any other company with a mind to compete in making money from local businesses with its new Facebook Deals service.

Facebook Deals connects U.S. consumers with local businesses via the Facebook Places check-in social service. iPhone users must install the Facebook for iPhone 3.3 application, touch "Places" and then "Check In."

Nearby stores participating in Facebook Deals will display a yellow icon. iPhone users can view the deal and check in to claim it, then show their phone to the cashier to receive the gift or discount. Starbuck's, McDonald's, Gap and some 20 other stores are currently enrolled in the Deals program.

Consumers who check-in via Deals get free or discounted goods, or have donations sent to charities. Businesses can lure both new and returning patrons, explained Tim Kendall, director of monetization for Facebook, during the Deals launch Nov. 3.

Facebook made it clear during the launch event that it doesn't explicitly make money from Deals--for now, at least. Over time, Facebook will urge its business partners to promote their products in Facebook's display ads.

"The Deals concept starts to solve an age-old problem, at least in the Internet world, that businesses had," said Emily White, director of Local at Facebook. "For a long time, merchants have been told 'you need to be online.' But for local businesses, the reason behind that hasn't been entirely obvious to them."

Deals, White argued, will turn fans, visitors, and eyeballs into real dollars. Merchants can sign up for Deals with a one-page workflow form.

Thanks to its 500 million-plus users, Deals is a major threat to services such as Foursquare and Gowalla, which rely on the check-in mechanism to give consumers store coupons, bargains and other perks.

Foursquare has 4 million users today, but who would use it going forward when shoppers can check-in from Facebook and access more or better deals? Forrester Research analyst Augie Ray told eWEEK:

"Facebook has found the perfect recipe for encouraging people to check in, including those who never before saw a reason to do so."

"This is a win-win-win," he continued. "Consumers will be encouraged to check in more often because of the deals available; businesses can drive more traffic and reach consumers with offers that cost nothing; and Facebook wins by increasing engagement on the platform."

Facebook Deals Poses a Challenge for Google


How Deals affects local search services such as Google Places is less certain. Google has thousands of local businesses using its Places solution, which lets local businesses pay to customize Place pages that surface on Google.com and Google Maps.

Businesses also pay Google $25 per month to offer Tags--little yellow call-outs in their Place Pages--that tout specials. Google last week launched Google Boost to make it easier for small businesses to build their own AdWords ads to pair with their Place Pages.

This is an impressive layer cake of local search and advertising, but it doesn't really supply the social element that the other check-in services supply. Google has check-in technologies via Google Buzz for mobile and Google Latitude, but it hasn't properly tied them to Places.

One could argue that a combination of Facebook Deals with Google Places would provide a formidable front for local online search ads. As it is now, Google lacks the social, and Facebook lacks the local.

Unfortunately for Google, Facebook will be able to sign up new business partners for Deals faster than Google can infuse Places with social elements.

It's a race to be sure, but one that Facebook is leading even though Deals is only available on the iPhone for now.  

There is a silver lining for Google and the startups: Very few people in the U.S. are using check-in services yet.

A fresh study released today from Pew Research Center's Internet & American Life project found that only four percent of online adults use a service such as Foursquare or Gowalla. On any given day, one percent of Internet users are using these services.

This means check-in services are ripe for exposure to a greater percentage of the country's 60 million or so smartphone users. It also means more users and financial opportunities for Google--if it adds similar check-in services--Foursquare, and Gowalla.

Facebook Deals may actually help buoy financially driven check-in and deal-making on the Web in general, a tribute to the rising-tide-lifts-all-boats aphorism.  

"It is possible that Facebook will help bring location into the mainstream," Kathryn Zickuhr, who wrote the Pew report, told The New York Times. "It would not be surprising to see if that helps people get used to it."

Rocket Fuel