Facebook Gets Groupon in Its Crosshairs with Local Deals

Facebook is testing a new local deals service that lets users buy deals on the social network and share them with friends. In Austin, Dallas, Atlanta, San Diego and San Francisco only.

Facebook is testing a new discount service that allows people to buy deals on Facebook and share them with their friends, the company's most direct assault yet on local deals giant Groupon.

The social network, which boasts more than 600 million users, will test this service in Atlanta, Austin, Dallas, San Diego, and San Francisco.

"We will test a new feature for our Deals product that allows people to buy deals on Facebook and share them with their friends," Facebook said in a statement. "Local businesses will be able to sign up to use this feature soon and people will be able to find Deals in the coming weeks."

Web-based local deals is a market startups such as Groupon and LivingSocial have blown right open by cold-calling and visiting local businesses to get them to mark down goods and services for the sake of bumps in volume. Facebook, Google, Yahoo and others are looking to join the fray.

Inside Facebook said Facebook is showing a special story in the News Feed suggesting that users subscribe to updates for its new prepaid coupon service, and invite their friends to subscribe.

Users may click a link to be whisked away to a new subscription page for Deals which says that subscribers will soon get news feed updates about local promotions.

Facebook users will be able to buy such coupons as "Unlimited bowling with 6 friends for an evening for $60 (75% off)" or "Luxury winery tour and 25% off all wine purchases for $50."

This new instantiation is a departure from the existing Check-in Deals service, which users access by checking into more than 20 participating stores via Facebook Places from their Facebook for iPhone app.

Google March 10 launched a similar check-in deals service for Android smartphone users for the South By Southwest Interactive festival.

For the duration of the show this week, Android smartphone users can check in to more than 60 shops in Austin, Texas from the Google Latitude application to claim deals.

With check-in deals, Google and Facebook have joined Foursquare in dipping their toes in the deep pool of mobile, local and social search.

Facebook's move to expand Deals to directly compete with Groupon's socially oriented deal-making follows Google's quiet testing of Offers, a similar service that offers users discounts for claiming deals.

Facebook and Google both want a piece of the action Groupon has cultivated with almost $1 billion in sales in 2010. Groupon isn't standing still, either.

While Facebook and Google scramble to match its success, Groupon has teamed with Lions Gate Entertainment to offer half-price tickets to its new movie "The Lincoln Lawyer," which opens March 18.