Last week, Facebook made a rather unexpected announcement - that it was killing off its daily deal business.The easy and more salacious conclusion suggested a fault with the deal model. If it was a good business (model), then Facebook would have stuck to it. Right? Maybe, but probably not.
It Didn't Do Much Business
If you speak to any of the seven partners that Facebook leveraged for their deals, they can tell you that the company never became a meaningful source of traffic. Given that Facebook partnered with everyone but the top two, the biggest losers were deal providers three on, each of whom happily touted the partnership in press releases and internally hoped that access to hundreds of millions of users might catapult their businesses. They were probably more disappointed that the partnership didn't reach its full potential, but they could also tell you that the integration was not an easy one.
When the partnerships were announced, it always seemed odd that Facebook might not go the route of Google and own the merchant relationships, but the hypothesis was always that Facebook was testing out various partners and would simply buy the one thye liked best.
Online Deals Never Were a Great Fit
The deals business is fine, but the direct marketing nature of the current deals business has no place in the socially focused world of Facebook. Message-based deals are not a scalable technology play, at least not yet. They are the new Yellow Pages. Facebook tried to put a social spin on deals, but the market just wasn’t there yet. Equally important from Facebook's perspective, the deals model is not self-service, and everything else that Facebook has for businesses large and small is self-service. This is why they didn't kill all deal products, check-in deals are alive and well and not going anywhere.They scale, fit large national brands as well as small merchants, require no sales force, and rely solely on technology.
Facebook Is Doubling Down
No matter what Groupon might say, they aren't a threat to Facebook, and the latter didn't shut down deals to protect ad revenue from the deal site. It's the other G that matters - Google. The search giant’s entry into the social graph might be a lesser issue today, but that a company could gain so much traction so fast must have been a wake-up call to Facebook. Their fingers are presumably no longer on the panic button, but a better product in many respects is out there. Most importantly, Facebook has long been associated with identity, and Google has almost directly said that Google+ is an identity play.
Consumer identities are just one piece. If Google can capture some of the business identity market, which has truly propelled Facebook as a business, the company has a real threat on its hands. Facebook's pages product is not slick, and it operates in a closed ecosystem. Google+ has the potential to not only create a better page but as other has already discussed, tie into both Google search results and the social / interest graph. The chance to get more traffic from Google is a benefit of Google+ that Facebook cannot inherently address....so, it’s time for them to get busy making sure businesses (and users) will continue to dedicate themselves to the platform and allow Facebook to control their online identities.
As for deals, it's a marketing tool. If Facebook doesn't have the businesses, having deals for them will be meaningless. This decision just shows they have their priorities in order.
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