Why Facebook Killed ‘Deals’

Share this:

When it launched in April of this year, Facebook Deals was looking to capitalize on the a hot daily deal trend that had been led by Groupon and others. Late last week, however, Facebook announced that it is killing the program, saying in a press release: “After testing Deals for four months, we’ve decided to end our Deals product in the coming weeks. We think there is a lot of power in a social approach to driving people into local businesses. We’ve learned a lot from our test and we’ll continue to evaluate how to best serve local businesses.”

My initial reaction to the news was to conclude that Facebook might have simply found the deal space overcrowded. Between Groupon, LivingSocial, Yelp, and what seems like a daily stream of new entrants, there’s very little novelty left in the daily deal phenomenon. Secondly, it seemed logical that rumors of Groupon’s pre-IPO financial troubles may have prompted some sober second thought about the validity of the deals opportunity in general. Perhaps Groupon would prove to be the overvalued canary in the coal mine.

But it was something Facebook founder Mark Zuckerberg was once quoted as saying that got me thinking that there might be more to the decision to end the Deals program than meets the eye. Zuckerberg said that Facebook operates on the premise that everything is more fun when it’s social — the idea being that music, photos, events and even simple thoughts, are inherently more enjoyable when shared with others. It’s precisely for this reason that I believe the company killed Deals.

In reality, deals themselves aren’t very social. In fact, deals on their own, are the antithesis of social. They don’t share well. You could go so far as to say that the best deals are most often coveted and kept secret from others. After all, if everyone shares the deal, it’s not really a deal, is it? Getting deals aren’t always something people want to brag about either; some people would rather die than have their friends know they used a coupon or discount. In fact, some will go out of their way to let people think they’ve paid full price, when in fact they actually got a deal.

So if Facebook is looking for a “social approach to drive customers into local businesses,” deals may simply be a poor mechanism for doing that. Furthermore, a deal is only meaningful if the product, brand or retailer is valued in the first place. Ten percent off of lunch means nothing if the restaurant doesn’t have a reputation for good food.

Daily deals as we know them aren’t a great fit within the social ecosystem that Facebook has created. Deals are relatively non-sticky things that generally need to be pushed at users, instead of being pulled, liked and shared by the users themselves — the essence of Facebook’s model.

What Facebook has proven, if nothing else, is that it’s a tenaciously focused company that can seemingly do just about anything. That’s why I can’t help think that the move to end Deals is less about an inability to win in the deal space, and more about them understanding the fruitlessness of winning at all.

Retail industry futurist Doug Stephens is the founder of Retail Prophet. Doug speaks, writes and consults for companies, trade associations and governments across North America and Europe about the evolution of retail and consumer markets. He will be moderating a panel about location-based retail systems at the Street Fight Summit in October.

The Street Fight Summit 2011 is coming up. Don’t miss your chance to mingle with the top minds in the industry. Click here for more details.