Facebook plans to go to war with new Groupon killer

26 Jan 2011

The rampant success of group buying site Groupon may yet be stalled by Facebook’s decision to launch a new feature called ‘Buy with Friends’, which will allow users to share purchases in their update stream with friends.

The hive mentality of the Facebook proposition could mean that product purchases could trend, leading to more sales for ordinary businesses. For example, as well as sharing the ability to purchase something like a night for 10 at your local bowling alley or a dinner for eight at a bistro, other users can ‘unlock’ a deal and then share that deal or discount with other friends.

Facebook’s move comes just a week after Google revealed it was also planning its Groupon killer in the form of Google Offers. Google is already talking with small businesses to get them involved in a test run of a pre-paid offers/vouchers programme.

Virtual goods to virtual currencies – real world benefits

Facebook’s plans to take part in the thrift-driven group-buying phenomena were revealed yesterday at the Social Apps Conference in San Francisco, where the social network’s head of commerce product marketing Deb Liu mentioned the new feature in the context of social games and virtual goods and the ability for users to buy goods using Facebook’s virtual currency, credits.

The thrift-commerce movement led by Groupon, Living Social, Yelp and others has taken the online world by storm and it could be said has been born out of the recession, where cash-poor people simply don’t want to stop living and having fun. The other real boon of the Groupon effect is ordinary businesses in cities across north America can barely keep up with all the business being driven to their premises.

After spurning a US$6bn offer from Google and taking on US$950m in venture capital, it has emerged that Groupon is planning a US$15bn initial public offer in the coming months.

In recent weeks, Groupon made history as the largest financing round for a start-up after it raised US$950m in investment from Greylock Partners, Kleiner Perkins, T. Rowe Price and Morgan Stanley.

Groupon – a play on the words group and coupon – brings business directly to the door of local businesses.

Groupon does so by using the web to enable groups of individuals to buy products in bulk. The site makes a daily offer to each and every community in the 230 markets it is active in. If a certain number of people sign up for the offer, the deal becomes available for all.

The site has more than 20m subscribers and plans to serve 300 cities worldwide by year’s end. The company has introduced seminars and a training programme for merchants who have reported they have been overwhelmed by the amount of business the site has sent their way.

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years