Is Facebook Moving in on Groupon’s Turf?

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Facebook is testing the addition of Groupon-style discount offers to its Facebook Places location feature, according to a report from All Facebook, which said it got word of the deal from a company involved in the test. Under the terms described by this anonymous source, the retailer would offer a free product to a user if three of their friends checked in — or were tagged — at a specific location during a specific period via Facebook Places. If true, such offers would bring the social network into competition with Groupon and other group-discount services.

Although there have been some questions raised about the authenticity of the email (based in part on the use of the term “Facebook followers” instead of the term “fans”), the idea that Facebook would tie discounts to its Places feature makes a lot of sense. As the social network tries to come up with more offerings for advertisers and merchants that leverage its 500-million-strong userbase, combining its new location-based feature with a pitch to retailers seems like a natural.

Some businesses have experimented with offers for users who check in via Foursquare, but so far, the location-based discount is a potential marketing feature that remains relatively untapped. As Om pointed out in a post about a startup called Whrrl — a location-centric discovery service that has rewards built in — “Place data combined with the social graph adds up to an engaged experience, which is an opportunity to make money.”

If Facebook was to bring the weight of its vast user base to bear on that market, it would definitely have an impact on both Foursquare and Groupon, as well as similar group-buying services such as LivingSocial, which I wrote about recently. While Groupon has been growing at a dramatic rate — thanks in part to the more than $160 million in venture financing from a number of prominent VC funds, including Russian holding company (formerly known as Digital Sky Technologies) — there have also been increasing signs of competition in the space, including the launch of a similar group-discount feature from Walmart called CrowdSaver, which is offered through Facebook.

Whether Facebook Places-based deals would be able to bridge the gap between the social network and actual shopping behavior in the real world remains to be seen — assuming the report becomes a reality. Groupon, meanwhile, is continuing to expand its reach; it has reportedly signed an agreement with Yahoo to do a global distribution deal, and has signed similar agreements with eBay and Ning. There have also been rumors that Yahoo is interested in acquiring the company for as much as $2 billion.

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