The report is interesting, and we’ll have to see if the tests lead to a widespread product. It could put more pressure on existing payments players and potentially cut into the growth prospects of Square and others if it can find traction. Groupon is reportedly offering merchants a free iPod Touch, not just a credit card reader, to process transactions.

But it got me thinking that it seems like a number of loyalty and deals apps will start going down this road, adding mobile payments as a way to build out their services. These days, there’s a big land grab going on in local. People are trying to provide merchants with tools for deals and offers, loyalty and payments. Some of the latest payments plays like Google Wallet’s and Isis’, two NFC wallets, are trying to tackle all of those services. But we have some other startups who are coming at this from a deals or loyalty angle, and increasingly they are moving to offer the entire package to appeal to merchants.

Paying with LevelUp

LevelUp, for example, started out as a Groupon competitor but then retooled by building its own payments system into its app using help from Braintree. Now consumers can not only take advantage of discounts but also transact right through the app, closing the loop on offer redemptions. That’s a key point, because it means a merchant can understand how effective these programs are because they can see exactly how much money they’re generating.

With more payments tools like Braintree, Stripe, Card.io and CardSpring, which allows people to sync their credit card to an app, we are seeing more apps build in payment services. I just wrote about two loyalty services, Cardify and Mirth, that launched this week that use CardSpring as a way to track and reward spending. Groupon itself introduced its own Groupon Rewards loyalty program earlier this month that allows consumers to sync their credit cards to get rewarded for their purchases at certain merchants.

Ultimately I think we’ll see more of this convergence as these apps try to become a one-stop shop for merchants, providing deals for demand generation, loyalty for continued engagement, and payments to close the loop and track spending. It’s going to get really confusing for local businesses, which are going to have to decide who they want to turn to as their local operating system, a term Groupon’s CEO Andrew Mason coined recently.

That also means I wouldn’t be surprised if Foursquare gets into the mobile payments arena. It already provides specials, and with its partnership with American Express, it allows those cardholders to redeem AmEx deals by just using their credit card. But if it wanted to, Foursquare could easily add a broader payments system or a card-tracking system of its own. That would help it explain to businesses how valuable the Foursquare service is. Right now merchants are rewarding user check-ins, but they don’t have a way to tie rewards to actual spending through Foursquare. This could introduce a new level of complexity for merchants, depending on the solution chosen. But it may be worth it for Groupon, Foursquare and others to look at becoming more of a resource and service for merchants.

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“We think there is a lot of power in a social approach to driving people into local businesses,” Facebook said in the statement. “We’ve learned a lot from our test and we’ll continue to evaluate how to best serve local businesses.”

It’s an interesting turn of events considering how much interest went into Facebook’s offers effort. We talked about how the power of Facebook Deals because of how social it could be, as opposed to Groupon and Living Social. But it looks like the deals business is harder than we thought, especially if it’s not unique enough.

This would appear to be good for Groupon: As it prepares for its IPO, it’s now lost one big competitor. Facebook’s exit from the space might also favor incumbents who are already committed to the model and have those relationships with consumers and merchants. And it might underscore how much manpower is needed to make something like this work.

Or does this signal some more inherent weakness in the larger deals model? It’ll be interesting to get more reasons as to the decision. Facebook also pulled back on its check-ins and is closing its Places tab on Facebook mobile in favor of a broader tagging system that allows users to add location tags to any action.

It’s still early in the daily deals business and with a lot of questions swirling around Groupon’s IPO, we still don’t know how viable this will be over the long haul. But at least for now, there’s one less competitor in the game.

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Take Peixe Urbano. The Latin American daily deals company has amassed a user base of more than 11 million subscribers since its launch in March 2010, co-founder Alex Tabor said in an interview last week. And according to him, the Rio de Janeiro, Brazil-based company has no plans to stop there.

“Brazil as a country is growing very quickly and the amount of investment here is surging,” Tabor said. “We have a booming sector in the tech industry.” That environment also means that while Peixe Urbano is currently Brazil’s daily deals leader, it has no time to rest on its laurels. “We have a lot of competition, so we have to keep running at full pace.”

To that end, Peixe Urbano now has 750 employees and is hiring rapidly, recruiting project managers from as far away as the San Francisco Bay Area. Peixe Urbano has steadily expanded its footprint to cover more than 60 cities in its native Brazil and Argentina, and the company has near-term plans to expand into other locations in Latin America such as Mexico.

This week Peixe Urbano announced it has signed a deal to use Message Systems’ digital messaging platform to handle its massive daily email needs. At present, the company sends more than 20 million emails every day, most of them before 5:00 AM, Tabor said. Being able to send emails reliably and safely is a hugely important part of Peixe Urbano’s business, since some 60 percent of its sales come directly from its emails alone.

All that growth has not flown under the radar of tech industry investors. Peixe Urbano raised $7.86 million outside capital in January 2011, according to Securities and Exchange Commission filings. That funding round was led by Silicon Valley venture capital firm Benchmark Capital and Brazilian VC Monashees. TechCrunch reported in May that Peixe took on additional funding in May from General Atlantic and Tiger Global Management, but regulatory documents regarding that round have not turned up on the SEC’s online database.

Groupon already has developed a strong hold on Latin America, according to data released earlier this month by Comscore. But Peixe Urbano controls a solid portion of the South American market and has made no secret of its plans to grow. And if the past year has been any indication of its ambition, Peixe Urbano is not the kind of company to give up market share without a fight.

Here is a screenshot of a recent deal on Peixe Urbano (click to expand):

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As expected, Facebook has launched its group-buying effort in five cities today, including Dallas and San Diego. The new feature is called Facebook Deals, and offers users the ability to get discounts from local retailers either directly or through a number of partners Facebook has lined up, including the white-label Groupon competitor Tippr. Whether the new service becomes a “Groupon killer” remains to be seen, but Facebook has two major weapons in its arsenal: Deals playing directly into the power of the site’s social graph, and the integration of Facebook Credits.

As we wrote recently when Deals was still in the planning stages, the biggest threat the new offering poses to Groupon is that Facebook is truly social in a way that Groupon and its competitors, such as LivingSocial, aren’t. The rise of Groupon was seen by many as a sign “social shopping” had arrived, but the discount offers from the Chicago company and its ilk aren’t all that social. In many ways, they’re just email marketing with a 21st-century spin.

It’s true you can share the deals you activate on Groupon by posting them to Twitter and “liking” them on Facebook, which is better than most email marketing campaigns. But as Facebook Director of Local Emily White has noted in interviews about the Deals launch, any offers a user signs up for or even expresses interest in will automatically be broadcast to his or her social graph. That’s a very powerful tool — and in some ways, achieves the same kind of viral potential Facebook tried and failed to take advantage of with its ill-fated Beacon rollout in 2007.

Facebook also said it isn’t focusing on deep discounts the way some other services do, but is targeting offers that have some social element, such as a baseball game or dinner for two. That’s a smart decision, since one complaint about Groupon is that gets people in the door, but rarely turns them into repeat customers.

The other interesting aspect to Facebook Deals is that it will make use of Facebook’s internal monetary system, Facebook Credits, becoming the first program to allow users to pay for real-world products and services. Until now, these credits — which amount to a billion-dollar economy within Facebook — could only be used to buy add-ons within social games and other digital features, such as movie rentals. There’s an intermediate step, however. According to White, credits will be used to buy a coupon or voucher, which can then be exchanged for the discount (possibly to avoid legal issues around using Facebook Credits as a real-world currency replacement).

As with most virtual currencies, the big benefit for Facebook with using credits is that it insulates users from the real cost of what they are buying — which is why retailers love to use things like Aeroplan points and other similar systems. And anyone used to playing social games on Facebook via Zynga and other similar services, which includes several hundred million people, is pretty used to paying for things using Facebook Credits. That could make paying for discounts and deals a lot more palatable for someone who might never give their credit card to Groupon.

Does all this make Facebook Deals a “Groupon killer” right out of the gate? Hardly. It remains to be seen whether large numbers of people will want to take advantage of these deals, or whether they’ll want to spam their friends with information about them. That said, if anyone has all the right ingredients to make social shopping work on a really large scale, it’s Facebook.

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Facebook is planning to roll out a new version of its Groupon-style Deals feature over the next few weeks, starting with a number of cities such as Atlanta, Dallas and San Diego, according to the company’s director of local. Not surprisingly, the new version of these digital coupons plays on the social nature of Facebook and its ability to influence a user’s social graph. While the social network may be late to this particular party, doing that is going to focus attention on one big hole in the Groupon model: namely, the fact that it isn’t really social.

Emily White, a former Google ad exec in charge of the effort, describes in an interview with Internet Retailer how the site will highlight in a user’s news feed if they have indicated interest in a particular deal, and also if they have actually purchased one. Presumably, users will also be able to opt out of this feature, given Facebook’s experiences in the past with ventures such as Beacon — which publicized purchases users made at other websites and was eventually shut down after a firestorm of criticism from privacy advocates. According to White:

The fact that every step of the process — from interacting with the deal, booking the deal and experiencing the deal — is tied to friends makes it more likely that you’ll have a positive experience.

Obviously, a lot of that is Facebook’s spin on why its new service is going to be competitive with Groupon, which has become the 800-pound gorilla of email marketing by expanding rapidly over the past two years into more than 500 markets. The company’s revenues are estimated to be in the $2-billion range on an annualized basis, and it’s said to be planning a public share offering that could value the company at more than $25 billion. What Facebook is to social networking, Groupon has become to email discounting.

That clearly poses some challenges for Facebook, as my colleague Ryan noted recently. But Facebook’s view of its strengths compared to Groupon isn’t just spin. It reinforces that deals from Groupon — and even from competitors such as LivingSocial, which is also valued in the billions of dollars on the private market — aren’t that social. I wrote about one of the drivers behind Google’s reported $6-billion offer for Groupon being the fact that advertising is becoming social, and that is true. And when it comes to being social, Facebook is light years ahead of Groupon or LivingSocial.

It’s true that you can see how many other people have signed up for a deal when you go to the website from the email Groupon sends you, and there are some standard web-sharing buttons that let you post to Twitter or say that you “liked” the deal on Facebook. But that’s still not terribly social. What if you could see these deals — and which of your friends signed up for them — right in your Facebook news feed? The immediacy of that, mixed in with the other social signals and activity you are already looking at, could make you more likely to click on a deal, or even to be aware that one is available. Add the ability to comment on a deal, and it becomes something much more social that anything Groupon offers.

The news feed — the same thing that made Beacon so appealing, but at the same time so disturbing to some — is Facebook’s not-so-secret weapon, and the new version of Deals is clearly going to take advantage of that in a way it hasn’t before. Competing with a $2-billion monster is not going to be easy, even for Facebook, and signing deals with retailers is one area where the size and scale of Groupon represents a fairly compelling competitive advantage. But Facebook has the news feed and the social graph, and if advertising really is becoming social, that is a very powerful force indeed.

Post and thumbnail photos courtesy of Flickr user Crystaljingsr

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The quarterly Ernst & Young global technology M&A update, published Wednesday, takes a broad overview of the technology industry’s mergers and acquisitions over the past three months and across the whole of last year.

The condensed version:

• More deals are being made. The fourth quarter of 2010 saw 27 percent more deals being struck than in the same period of 2009, although activity was only marginally higher than third quarter 2010 (702 deals worldwide compared to 700 deals). Across the year, there’s significant growth.
• Those deals aren’t necessarily of greater value. Across the whole of 2010, the average deal value dropped by 10 percent to $131 million, down from $145 million in 2009. However, the value of private equity deals increased; it was straight-up corporate acquisitions that showed the big drop.
• IPO activity is increasing rapidly, rising from just 55 flotations in 2009 to 180 in 2010. Fourth quarter 2010 saw 53 stock market debuts alone — almost as much as the whole of the previous year.
• Europe is spending heavily. In previous years, European nations have often been regarded sellers, building companies that are then acquired by rivals elsewhere — a production line of startups and services bought by American firms (think Skype and MySQL for starters). In 2010, however, the two regions switched places: Europe became a net importer, and the U.S. became a net exporter. The European country leading the charge was the U.K., which overtook Japan in terms of deal activity with 66-percent growth.

E&Y’s Joe Steger characterizes this as strategic:

“Although big-ticket transactions slowed down during the first quarter, the technology sector has continued to see a steady increase in deal activity — particularly small, strategic deals,” he says.

Underneath it all, it’s hard to know exactly what this means; after all value is not the same as worth. The numbers are driven by some big acquisitions, such as SAP’s $5.8 billion acquisition of Sybase, but it’s a mixed picture overall.

What I suspect it indicates, at least for now, is that European technology companies are no longer as keen to flip early to American buyers; U.S. companies are still highly acquisitive (Google alone made 28 deals); but essentially larger companies are happier to consolidate right now. They’re able to take advantage of the weaker market to strike, whether it’s for opportunistic purposes or because they are making those longer-term strategic bets that Steger mentioned.

It will be interesting to see whether this pattern plays out over 2011 as well. What does the picture look like to you?

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In a quarter that saw Twitter receive $100 million and Tesla Motors pull in $82.5 million in funding, a total of 680 deals worth $6.056 billion closed, with 40 percent of the quarter’s deals taking place in September. Early-stage companies accounted for about 30 percent of deals done in the third quarter.

Investment in Internet companies was $1.05 billion while the mobile and telecom sector pulled in $800 million in VC money. Cleantech companies received  just under $1 billion in funding. Katie over at Earth2Tech recently covered the venture capital investment trends, including the recent rebound.

So how were investment dollars dispersed geographically? The chart that follows says it all.

Funding in California-based startups rose to $3.43 billion in the third quarter from $2.27 billion in the previous one, an increase of around 51 percent. Including the Twitter, Tesla and Solyndra deals that took place last month, California was home to eight of the 10 largest VC deals in the U.S. during the third quarter.

Graphics courtesy of Chubby Brain.

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