Facebook and Google plot to disrupt group buying momentum

With the launch of Facebook Deals in Canada and Google’s addition of location-based check-ins through Latitude, the group buying trend may find itself disrupted just as its hitting its stride.

Group buying services such as Groupon, WagJag, Living Social, Team Buy, Team Save, Swarm Jam, Kijiji Deals, Captain Save, etc. really took hold in 2010 and now citizens of most major cities around the world have their choice of a pile of daily discount deals to choose from. There’s so many out there that aggregator sites such as even sprung up to simplify the deal-shopping experience for users.

Brian Jackson, journalist
Brian Jackson

Now just as it seems that group buying was the trend that was going to single-handedly bring local business transactions into the e-commerce space, the two biggest companies on the Web might have something to say about that.

Facebook launched Deals in the U.S. several weeks ago, and rolled out a beta service of the program in Canada and Europe on Monday. Soon enough, every local business that has claimed its “Place” on Facebook will be able to create a discount offer simply by filling out a one-page online form. So long as it is approved by Facebook, the deal goes live and is published to users free of charge.

Yesterday, Google announced it is adding a check-in feature to Latitude, which is basically a social add-on to Google Maps that shares your location with your friends based on your GPS coordinates.

Arguably, the check-in process offered up by Google is more slick than that offered by Facebook or other geo-location check-in services such as Foursquare and Gowalla. Users can choose to be checked in to locations automatically when they are in proximity to them, for example. Users can also choose to keep silent about checking in to certain locations. Google has added the gaming aspect that Foursquare brought to check ins, awarding users who check in to the same locations often with Regular, VIP, or Guru status.

It’s a no-brainer that Google will soon offer a Deals feature integrated into Latitude’s check-ins. All the ingredients for the service already exist in Google’s repertoire – as businesses can manage a Places page and even offer a coupon via that service.

Groupon reportedly rejected a $6 billion acquisition offer from Google, and Google may now be looking at a Facebook Deals style model instead. There’s several reasons to think that Facebook and Google could disrupt the group buying sites model and steal away both businesses and consumers.

First of all, businesses using a service such as Groupon must share the revenues they make from a deal with the service. Since the shop is already offering a deep discount on a product or service, it hurts even more to give up half the revenues from the sales burst. If a business offers the same discount on Facebook Deals, they get to keep all of the revenue on the sales.

Second, consumers who want a deal offered by a group buying site must register with the site to gain access to the deal. This is an obvious barrier to selling consumers your discounted offer, and since there is so much competition in the group buying space, it can be hard to decide what service is the best option to promote your deal. But since most Web users already have a Google or Facebook account and are used to accessing third-party services with these logins, there is less of a barrier to accessing the deal.

Lastly and most importantly – check in services can actually build customer loyalty while group buying sites tend to be one-shot revenue bursts. Because of the nature of check ins, businesses could reward customers who return often. Facebook Deals, for example, offers a “loyalty coupon” that rewards a customer with a free latte on their fifth visit to the coffee shop. For businesses, return customers are many times more valuable than a customer who’s only coming in once to score a big discount on a buy.

Groupon President Rob Solomon told me he saw his company as a leader in a market space potentially worth $1 trillion on a global basis. He may be right about that sort of market size when accounting for the local economies previously not captured by e-commerce, but I wonder if he considered that he’d soon be competing with a new discount model championed by the likes of Facebook and Google.

Brian Jackson
Brian Jackson
Editorial director of IT World Canada. Covering technology as it applies to business users. Multiple COPA award winner and now judge. Paddles a canoe as much as possible.

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