Inside Facebook

Facebook has told Reuters that it plans to discontinue its pre-paid coupon service. “After testing Deals for four months, we’ve decided to end our Deals product in the coming weeks,” the company said. Groupon, LivingSocial, and Google Offers may breathe a little easier this weekend.

At first, expectations were high for Deals, as Facebook could have leveraged its enormous user base, various communication channels, and payment system Credits to help the product gain traction. However, it appears tests in eight cities did not prove that users wanted Deals or that the product, as it was, fit the social network

Facebook never put its full might behind Deals. It initially injected stories into the news feed asking users to sign up for the service, and later promoted the pre-paid offers with emails and real estate in the sidebar. Still, Facebook apparently chose to hedge its bets and watch how users reacted rather than initiating flashier promotions or bombarding the news feed.

Just last month, Facebook added Charlotte, St. Louis, and Minneapolis to the original test cities, San Francisco, San Diego, Dallas, Austin and Atlanta. This might have been an effort to see if cities less prone to early adoption that might not have already been satisfied by established daily deals services such as Groupon would respond better. Apparently not.

“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.”

In past reviews of the product, we criticized Deals regarding the quality of the experiences offered , the sometimes shallow discounts, and the way the experiences were ptiched to users. Had Facebook subsidized businesses to provide deeper discounts on attractive experiences, and came up with a more compelling design for the Deals-browsing app, the results of the tests might have been different.

The market also may have simply been over-saturated with daily deals after waves of Groupon clones flooded in seeking the business’ big margins. Facebook didn’t seem to figure out how to get users actively discussing Deals and recruiting friends in the same place they could buy them — what could have been a crucial differentiator.

Facebook’s foot traffic incentive system, Checkin Deals, which actually pre-dated Deals and used to have its name, will continue to run.

The announcement comes as other web services are deadpooling products that haven’t met expectations or don’t fit. Google announced it would dissolve Slide and drop most of its products including the recently launched Photovine. Gowalla also said it would strip out the Notes and Items features from its location service.

Facebook earlier this week confirmed with us it would scrap the Places check-in feed and map as it moves towards applying location as a layer to all posted content. The discontinuations might signal Facebook is looking to focus more as it tries to fend off advances of Google+. Or that it has something new in store for helping local business converts fans into customers.

Facebook Spent 320K on Lobbying in 2Q – TechCrunch reported this week that Facebook spent $320,000 on lobbying in the second quarter; the company has already surpassed its 2010 total lobbying spend in the first two quarters of this year.

Judge Dismisses Second Winklevoss Lawsuit –  Reuters today reported that Facebook was awarded a dismissal of a second lawsuit filed by Cameron and Tyler Winklevoss. The suit, filed in Boston, had sought to bring the twins more money on top of the $65 million settlement they had already received as the outcome of a suit claiming they came up with the idea for Facebook.

Facebook Testing a Phonebook App – VentureBeat reported that Facebook may be testing a phonebook app for mobile users, allowing them to see their contacts on Facebook as a phonebook and then dial them directly from the Facebook app on their phones. However, this could have been developed by Google to deepen the integration of Facebook with its mobile OS.

“Who Owns Facebook?” Website - Venture capital directory publisher Massinvestor has launched a website called “Who Owns Facebook?” that features profiles of all of Facebook’s biggest stock holders.

Fraction of Facebook for iPhone Users Complaint About Bugs – The Financial Times reported this week that there is a “revolt” amongst Facebook for iPhone users regarding bugs in the latest version of the app. In fact, the 20,000 users complaining make up just a tiny fraction of the app’s 84 million monthly users, and therefore does not represent widespread discontent.

Which Facebook Employees are on Google+? – AllFacebook reported this week that a slew of Facebook employees are on Google+, including CEO Mark Zuckerberg and several members of the executive team. Here’s a list of some of them.

Harvard President Slams Winklevoss Bros – Larry Summers, who was president of Harvard University when the Winklevoss twins had their spat with Mark Zuckerberg over the founding of Facebook, seems to have been no fan of the brothers. He basically called them a vulgar name, hinting that they are jerks.

Talenthouse to Develop Fan Skill Competition Apps - Talenthouse is a platform for running promotions on Facebook where fans can compete to donate their skills, such as blogging or video editing, to help complete projects for their favorite celebrities. AllThingsD reports that the company has signed a deal to provide apps for Universal Music Group artists.

Facebook Report: Engaging Readers on Pages – Facebook released an analysis of user engagement with posts by the Pages of news organizations Pages, noting the influence of thumbnail images, post length, photos, questions and more. This study fell in line with one we reported earlier of journalist Pages.

Other Announcements:

Buddy Media Expands to Europe – Buddy Media announced this week that it would open a European headquarters in London.

myYearbook, Quepasa Merge – myYearbook and the Quepasa Corporation agreed to merge this week, bringing the social game developer and Latino social network together. The $100 million deal reaches across Latin America, includes 70 million registered users, 2.2 million mobile app installs and 11.5 million mobile game installs.

French MXP4 Opens US Office, Signs Deal – French developer of music-based social games MXP4 will move business operations of its Bopler Games unit to a new office in Los Angeles, closer to US record labels. The week prior, MXP4 signed a deal with EMI to bring the music of the record label’s artists into Bopler Games.

Wispor Launches Using Faceboom Comments Plugin – Wispor is a newly launched discussion-based social network where users can start conversations about any topic. The site is built on top of the Facebook Comments Box social plugin in what appears to be the deepest integration of the commenting widget to date.

Third-Party Facebook Photos App Pixable Adds Video – Pixable, a Facebook app we’ve previously covered that helps users sort through all the photos their friends upload, now allows users to browse videos uploaded or shared by their Facebook friends.

RootMusic BandPage Launches Social Touring Feature – BandPage, a Facebook app that allows bands to set up a profile and stream their music, has launched an integration with concert date tracking services Songkick, Bandsintown, and SonicLiving. The Social Touring feature allows musicians to automatically have their tour dates imported to their BandPage from these services.

Facebook Deals, the company’s Groupon-style pre-paid coupon service, has now been live in beta for almost three months. While it so far hasn’t achieved the instant success some expected, Facebook has been cautious with promotion of the product rather than spam its news feed with Deals announcement.

Deal quality and usage has been relatively low, from what we’ve seen, but the company is also continuing to refine the product and launch to more cities, as it explains below.

Overall, the revenue potential for Facebook Deals is still promising, especially when you consider that the company wouldn’t need to buy ads promoting it — a major cost for other pre-paid coupon providers active on the platform, like Groupon and Living Social. Here, we’ll look at how the product is evolving, and what its best prospects are for gaining traction.

Taking It Slow

In March, Facebook began showing news feed stories asking users to sign up for updates about Deals in San Francisco, San Diego, Dallas, Austin and Atlanta. Facebook is both arranging its own deals and aggregating offers from deal providers including Home Run, OpenTable, and Gilt City. The Deals app, accessible through a bookmark in the right sidebar, currently shows between four and 13 available Deals in each city.

Rather than Liking a Page, Facebook’s standard update subscription mechanism, signing up for Deals means users are informed of new offers directly via the news feed and email, as well as through Facebook notifications. This gives Facebook the power to freely manipulate how prominent stories about Deals are in the news feed. However, so far, Facebook has not oversaturated the feed with with Deals announcements that could increase traction but also might detract from the social content, opting to promote through home page ads and emails instead.

The purchase of a Deal triggers a news feed story in the feeds of friends. While other pre-paid coupon services have to ask users to share news of their purchase with their social media contacts, Facebook does this automatically. This purchase virality could drive the success of Deals if it can gain initial traction.

So far though, our San Francisco-based team has hardly seen or heard of any people purchasing Deals. My Deals app’s “Deals Friends Like or Have Bought” section only could only tell me about two friends Liking the businesses offering Deals. Low traction in San Francisco, thought of as one of Facebook’s strongholds, suggests traction is probably low in other cities as well.

A core deficiency in the product that may be hampering traction is the generally low value of the Deals. Several offer discounts of as little as 20% off such as $40 for $50 worth of kayak rentals. Deeper discounts are often relegated to experiences that appeal to a small audience. With Facebook trying to create a groundswell of buzz for Deals, it may need to sidestep its provider partners and subsidize businesses to offer Deals that appeal to a wide audience with discounts worth telling one’s friends about.

Facebook’s official statement on the peformance of the Deals test to date is “the early feedback from businesses has been positive, and they have been able to find new customers to bring into their stores.  Facebook has seen that people are finding a lot of Deals through their friends and that Deals found through friends have higher conversion rates for businesses. We’re also seeing an increase in fans of a business after the Deal has run.” Notice that nothing is said about how many Deals are being purchased.

Five New Cities, Flashier Presentation

Still, Facebook tells us it is planning to expand the Deals program to Seattle, Denver, Charlotte, St. Louis and Minneapolis. Meanwhile, Google has launched its own Offers product in Portland, New York City, and the Bay Area, and plans to expand it to Austin, Boston, Denver, Seattle and Washington, D.C. Both are racing to lock down a presentation and distribution strategy that can attain a high conversion rate.

As part of these these trials, Facebook is testing a more stylized, graphic-oriente, and detailed presentation format for its Deals app. This format, which can be seen when browsing Deals in San Francisco, contrasts with the original Deals app design that showed small panels with tiny pictures and nothing but the headline and price.

The new format is much more compelling allowing users to immediately see what’s included in a Deal, when it expires, and if friends have Liked it without clicking through to view it’s full description. The ability to see a social recommendation from a trusted source for a Deal should increase the click through rate and bring more users in range of actually purchasing a Deal.

Facebook knows it hasn’t found the optimal design for the Deals product, and therefore has been wise not to promote it too aggressively. With time, it may be able to find a style that properly marries high value discounts with the social nature of the site. If Facebook can improve the value and presentation of its Deals, it’s not difficult to imagine friends discovering and purchasing them, inviting friends to buy them too, and planning a group outing to redeem them all within a news feed conversation.

Yesterday we confirmed that Facebook will soon begin limited private testing of a tool for corporations with local branches that allows corporate Page admins to manage the Places of their branches. As part of this parent-child limited private beta, corporations can also access a new Facebook Check-in Deals API. It lets them create different incentives, and run and manage them programmatically across any multiple Places.

The Check-in Deals API will make the product much easier for businesses to use at scale. This could increase adoption of the foot traffic reward system, which to date has appeared to be low even in highly wired markets like San Francisco.

Facebook launched Check-in Deals in November to allow businesses to give users discounts and gifts for checking in to their physical location by themselves, with friends, or multiple times. It was initially a managed service for select partners, but Facebook later rolled it out as in a self-serve tool to Pages that list a street address. In March, Check-in Deals metrics were added to Page Insights.

Before the Check-in Deals API, the product was best suited for small businesses with just one location, as manually administrating the rewards across multiple Places was difficult. Soon, test partner businesses with thousands of locations will be able to efficiently use Check-in Deals, which could significantly increase the volume of Check-in Deals available for users to redeem with their mobile devices.

To use the API, businesses must have already been set up with the parent-child Page structure by a Facebook representative. Once a Page admin has given manage_pages permission they can begin creating “prototype deals” that once approved can be copied to children Places. Admins can segment their total list of children Places and then run Check-in Deals at specific segments.

For example, one Check-in Deal could be run at every branch with a certain speciality, within a geographic area, or that carries a certain product. Admins can also use segmentation to A/B test deals at a few similar stores to determine which type and reward performs best before copying that deal to other stores.

Performance data will appear in Page Insights and Facebook plans to include metrics that aggregate performance across local instances of a prototype Check-in Deal. For details on Check-in Deal API calls, authorized users can consult this Scribd-hosted PDF.

Ease of use for big corporations should induce experimentation, in turn increasing awareness of the Check-in Deals product amongst both users and smaller businesses. If Facebook shows that the product can increase foot traffic to some of the worlds most popular store chains, the Check-in Deals API could start a snowball of adoption for the check-in incentive system.

While 66% of small businesses have used Facebook for marketing, only 22% have used Facebook ads, according to MerchantCircle, the largest online network of local business owners. The company released its quarterly Merchant Confidence Index survey of 5,000 local business owners today, and other findings include the following: two thirds of those who’ve used Facebook ads would do so again, location-based marketing is declining, and interest is on the rise for group deals, especially those published by familiar entities including Facebook and Google.

The survey’s results indicate that Facebook’s self-serve advertising business, which account for a very significant portion of its total revenue, has plenty of room to grow. If Facebook can convince more local marketers on the site to advertise, it could fuel big total revenue gains that might improve its standing in the event of a long-anticipated IPO.

While the sample size is relatively low compared to the amount of marketers and advertisers on Facebook, MerchantCircle doesn’t overtly tout an Facebook-related services, so the data shouldn’t be biased.

Here are the core findings of the study:

Facebook Ads

• 66% of local businesses use Facebook for marketing
• 94% of local businesses are aware of Facebook Ads, though only 22% use them
• Of those 22%, 65% said they would use Facebook Ads again
• Reasons cited for repeat use of Facebook Ads were: ease of use (66.5%), ability to pause (64.8%), quality of targeting (53.7%), opportunities for acquiring new customers (49.3%)
• Reasons cited for not using Facebook Ads again included: not acquiring new customers (69%), cost (34.5%), low click-through rate (28.5%)

The high awareness of Facebook Ads, coupled with the 44% difference between marketers and advertisers shows that there’s great potential for the self-serve ad product to grow. Facebook could increase the percentage of repeat advertisers and counter the biggest reason for not repeating by improving its education efforts and providing advertisers with best practices for targeting, creative, and bid management.

Daily Deals

• Only 9.4% of local businesses have offered a daily deal, with 8.4% saying they haven’t but plan to in the next six months
• 77% of those who’ve run deals say they’d do so again, up from 50% last quarter
• Citing familiarity with these big platforms, 52% of of local businesses would choose to run Facebook Deals or Google Offers instead of deals through Groupon, LivingSocial or other deals providers
• Other reasons for preferring Facebook included bigger audience size (26%), and better local targeting (21%)
• Other reasons for preferring Google included bigger audience size (42%), and brand reputation (34%)

Facebook’s daily deals service Facebook Deals is off to a shaky start, with anecdotal evidence suggesting few purchases due to weak value and low quality of available deals. However, MerchantCircle’s data indicates businesses are interested in using the service. Facebook needs to consider subsidizing Deals so it can hook users with huge discounts, and should consider improving copy-writing and design to make Deals more compelling.

Location-Based and Mobile Marketing

• 22% of businesses are using Facebook Places for marketing, down from 32% last quarter
• Only 7% are using Foursquare for marketing, down from 9% last quarter
• 18% of local businesses have used mobile marketing or advertising, with 71% citing a lack of understanding as their primary barrier to use.

Facebook’s location-based deals service Checkin Deals that builds on Places hasn’t seen much adoption despite it being a free way to inspire users to promote a business to their friends through checkins. Again, Facebook needs to provide better educational resources, perhaps in the form of webinars or live seminars in key markets to jumpstart business adoption of Checkin Deals.

Overall, the data tells a story of how Facebook holds significant marketing and advertising potential for small and local businesses. However, without large dedicated ads or marketing teams they can’t get a good enough understanding of social to dedicate spend there. While Facebook has purposefully tried to keep its number of employees low to maintain the startup feel, the strategy may be inhibiting it from conducting the education and outreach efforts that could accelerate growth of its business.

A few interesting additions to Facebook’s job postings this week both on its Careers Page and its LinkedIn feed. A handful of engineering jobs were added, mostly in Seattle, sales jobs in Palo Alto, California and Austin, Texas were also on the list. And, interestingly also in Austin, a pair of “Local Deals” jobs were posted.

Posts added this week on Facebook’s Careers Page:

• Corporate FP&A Associate
• International Payroll Lead (Dublin)
• Software Engineer, Ads Product (Seattle)
• Software Engineer, Generalist (Seattle)
• Software Engineer, Mobile (Seattle)
• Software Engineer, Products (Seattle)
• Software Engineer, Systems Engineering (Seattle)
• Data Center Technical Operations Manager
• Analyst, Monetization
• Solutions Engineer
• Local Sales Operations Manager (Palo Alto)
• Account Executive (Los Angeles)
• Manager, Merchant Services (Austin)
• Manager, Merchant Services (Palo Alto)
• Partnership Account Manager (Palo Alto)
• Analyst, Platform Operations (Hyderabad)
• Editor, Local Deals (Austin) – Contractor
• Writer, Local Deals (Austin) – Contractor
• Local Sales Operations Manager (Palo Alto)
• Manager, Merchant Services (Austin)
• Manager, Merchant Services (Palo Alto)

Jobs posted by Facebook on LinkedIn:

• Partner Engineer – Ads (New York)
• Account Executive (Singapore)
• Local Sales Associate (Palo Alto)
• Local Sales Associate (Austin)
• Monetization Analytics Lead
• Analyst, Monetization
• Business Operations Associate
• Manager, Merchant Services (Palo Alto)
• Manager, Merchant Services (Austin)
• Sales Marketing Manager (Toronto)
• Sales Marketing Manager (Palo Alto)
• Associate, Ad Operations (CHI)

Who else is hiring? The Inside Network Job Board presents a survey of current openings at leading companies in the industry.

Facebook has confirmed with us that it has started bringing Facebook Places functionality to some Pages representing physical spaces. Some Pages that list a street address, such as local businesses and public places, may be checked in to via Facebook’s location-based service Places, and may offer incentives for visiting in person through Checkin Deals.

Facebook tells us this automatic merge of Pages and Places “makes things easier for Page administrators”. We agree that it is a better solution than the now removed option to manually merge Places with Pages. By expanding the number of Pages that can run Checkin Deals, Facebook may be looking to drive user awareness and engagement with the product and earn money off of it through ads promoting the incentives.

When Places launched in August, owners of physical spaces could claim their Place, and also had the option to merge claimed Places with Pages. At the time, merged Places pages used the unfamiliar left-side navigation menu layout that wouldn’t be rolled out to until February. They also lacked some functionality of Pages, there were some bugs in the merging process, and they couldn’t be unmerged, making it a somewhat difficult decision for admins.

Facebook later temporarily provided an unmerge option but then revoked the abilities to merge or unmerge last month, possibly in anticipation of a shift towards this automatic merging.

Meanwhile, Facebook launched Checkin Deals in November that can be used to incentivize checkins with discounts or charity donations. Since then, though, few businesses have offered Checkin Deals, few users are aware of them let alone have redeemed them, and attention has shifted toward’s Facebook’s prepaid coupon service called simply Deals. These facts signal that Facebook needs to do a better job with outreach and accessibility — two things assisted by this change.

Now, Pages that list a physical address may show a “Friend Activity” tab that displays the checkins to that location by a user’s friends. This can give users a sense of what it’s like to be at the physical location the Page represents, and learn about what’s happening there in real time. If a Places page with the same name and address already exists, it may be rolled into the official Page.

Admins of these automatically merged Pages may also see a prompt at the top of their Pages notifying them that they can run Checkin Deals. They can also see a Deals tab in the left-side navigation menu of the Edit Pages admin interface. Facebook has been slowly rolling out the self-serve tool for creating Checkin Deals to more properties, including some Pages, since the feature’s launch.

As Pages typically have many more fans and more engaged admins than Places, the expansion of Places and Checkin Deals functionality to them should work to familiarize users with Facebook’s location-based services. Admins may be waiting for a clear success story before integrating Checkin Deals, so Facebook may be hoping the expansion of the feature to Pages might produce one of these cases. This could open the flood gate for businesses to start using and advertising for the incentives.

Facebook Announces Tech Heavy Set of 2011 Fellows – Facebook announced who was selected to become Ph.D. fellows this year. The Facebook Fellowship Program included people with backgrounds in psychology and economics last year; this year the five winners who receive tuition and fees for the 2011-2012 academic year, $5,000 for travel, $2,500 for a computer and a $30,000 stipend all study technical disciplines.

Specifically, Adrienne Porter Felt and Kurt Thomas of the University of California at Berkeley both study computer security, Yinan Li of the Universitiy of Wisconsin at Madison studies databases, Wei Liu of Columbia University studies machine learning, and Marke Olszewski of MIT studies compiler technology.

Facebook to Grow to 9,400 Employees by 2017 – According to public documents in Menlo Park, California Facebook plans to grow its workforce at its new Menlo Park headquarters from 1,400 to 9,400 people by 2017.

Facebook Deals All About Credits – AllFacebook reports that Facebook sources are saying that the company is not initially taking a cut of the revenue from its new Deals program. Instead it reportedly seeks to expand the reach of Credits, the in-Facebook currency.

Facebook to Host f8 in 2011 – Facebook has confirmed that the company will host an f8 conference sometime this year.

Facebook Valued at $70B on Secondary Market - Reuters reports that a group  of investors are trying to sell $1 billion of Facebook stock on secondary markets for amounts that would put the company’s total value at $70 billion; these investors previously tried to sell the shares for a value of $90 billion, but couldn’t move the stock.

Details of Russian Facebook Ownership – Gigaom reported this week that Russian investor Yuri Milner holds a 2.33% stake in Facebook, 1.41% stake in Zynga and a 4.63% stake in Groupon, among other investments and holdings.

Facebook Institutes “Hackamonths” - Facebook Engineering’s Dave Ferugson posted a note to the Facebook Engineering Page this week in which he detailed Facebook’s new “Hackamonth” program for engineers. Essentially the program will allow engineers to temporarily leave their current team to work on a different project; the goal is to have about 10% of the company’s engineerings participating each month. The Hackamonth program could become a recruiting talking point that lures engineers who are tired of working on the same project for years on end at other tech companies.

Details on Facebook’s Messages Server – The Facebook Engineering Team published a note this week that details the internal functioning of the Messages application server.

Facebook Advertises on Gmail – Facebook is running ads on Google, according to this screenshot. [Image via jing]

Friendster Deletes User Info on May 31 – A message sent to registered Friendster users announced that users should export their data because the social network is going to delete all of it on May 31. The company, from which Facebook purchased patents in Auguest 2010, notes that it will delete blogs, photos, comments, groups, etc., but keep accounts active and become an entertainment site, reported TechCrunch.

Blog Suggests New Feature for Facebook – A new blog, Yo Zuck! Implement This, takes suggestions for Facebook and creates mock-ups of their implementation. Youssef Sarhan is in Dublin and runs the blog, and has suggested a translate function, notification change and other interesting features. [Image via Yo Zuck]

MakeMeReach Raises €3M – The French Facebook-approved ad network and Facebook app developer MakeMeReach raised €3 million to fund international outreach for its services. Currently the company employs 25 and will use its funding to double staffing to move into Italian, Spanish and German markets, TechCrunch reports.

Along with the rollout of its new Deals group coupon service for businesses, Facebook has updated its overarching legal terms for all users and organizations in order to cover what Deal participants are agreeing to. The “Statement of Rights and Responsibilities” document now includes two new lines under Section 7, referring users to a new Deal Terms document and organization to Merchant Deal Terms.

Both new sets of terms look pretty straightforward (we’ve pasted them in below). People who participate in Deals may have their full names, as they appear on Facebook, shared with the Deals merchant, as well as their email addresses; users will also be bound by any additional terms of the deal. Facebook also says it “may send you information about additional Deals you may be interested in.” It’s not clear what the format of those additional messages would be, but Facebook has generally been conservative about promoting advertising to users so as to maintain a high-quality user experience. While people can’t currently opt out of receiving additional information about Deals, we’d also be surprised to see Facebook abuse the access it is granting itself here.

On the merchant side, the terms are straightforward. Deals need to comply with Facebook’s general Advertising Guidelines, the discounts must be from the regular selling price, they can’t “enroll customers into automatic renewal programs or memberships” and a variety of other terms.

Here are the full version of both new sets of terms, dated April 21, 2011.

Deals Terms

1. If you purchase a Deal on or through Facebook:
   1. Your full name may be shared with the partner or merchant;
   2. Your email address may be shared with the partner or merchant for use only in connection with your purchase;
   3. You will be bound by the additional terms provided by the partner or merchant offering the Deal; and
   4. We may send you information about additional Deals you may be interested in.
2. If you are under the age of 18, you will obtain permission from your parent or guardian before purchasing a Deal.
3. The Deal may include a Promotional Redemption Deadline before which you must redeem your voucher. See “Refunds” below.
4. Deals are not redeemable for cash except where required by law.
5. Deals may not be used to purchase gift certificates or gift cards and may not be combined with other offers.
6. Deals may not be purchased and resold.
7. Neither Facebook nor any partner or merchant involved in providing the Deal is responsible for lost or stolen vouchers.
8. Altered, manipulated, or defaced vouchers are void.
9. By “Deal” we mean the opportunity to purchase vouchers with promotional value or discounts, where the vouchers are offered and redeemable by a third party merchant featured in the Deal.

Refunds

1. The sale of Deals on or through Facebook is subject to our Payments Terms.
2. Refunds are available for unredeemed vouchers for up to 30 days from the date of purchase. If a deal you’ve purchased becomes unavailable before it can be provided to you, you will receive a credit of the paid price which can be used to purchase future Deals.
3. If a partner or merchant refuses to honor your voucher after the Promotional Redemption Deadline has passed, Facebook will credit you the paid price.
4. To determine whether you are eligible to receive a refund, you may:

• Access the “Your Deals” tab in your account;
• Click “Help”;
• Select “Dispute this Deal and request a refund” and click “Continue”; and
• Select a reason from the drop-down menu and fill out the additional info box with your request details.

————————

Merchant Deals Terms

1. Deals offered on Facebook must comply with our Advertising Guidelines.
2. Your deal may include a Promotional Redemption Deadline before which you must honor the full promotional value of the Deal.
   1. The Promotional Redemption Deadline must be clearly and conspicuously disclosed in all materials, including on the voucher itself.
   2. As the merchant, you are responsible for understanding the applicable laws and honoring all vouchers as required by law, including any refund or cash-out obligations.
3. After the Promotional Redemption Deadline, you must fully honor the paid value of the voucher for at least the minimum time required by appliacble laws.
4. Deals must be based on the regular selling price for the offered goods or services.
5. Once a deal has begun, it may not be altered or edited.
6. Deals may not include the following:
   1. Products or services that cannot be advertised on Facebook according to the Advertising Guidelines.
   2. Products or services that, upon redemption, enroll customers into automatic renewal programs or memberships.
   3. Products that are subject in your jurisdiction to minimum selling price or other restrictions that are inconsistent with offering the Deal on Facebook.  This includes, but is not limited to, gasoline, dairy, gambling, or alcohol unless explicitly authorized by Facebook.
7. By “Deal” we mean the opportunity to purchase vouchers with promotional value or discounts, where the vouchers are offered and redeemable by a third party merchant featured in the Deal.

Facebook stepped up its marketing efforts recently for its new group-buying feature Deals. Users have seen home page ads asking them to invite their friends to subscribe to news feed and email notifications about Deals. Meanwhile, Page admins have received location-customized emails from Facebook explaining that Deals could help them acquire more customers in their city. Facebook needs to build large subscriber and provider-bases to prime the service for an explosive formal launch.

On March 15th, Facebook soft-launched Deals, showing news feed stories asking users to sign up to hear about local pre-paid group experiences they could have with friends. The service, which lets users purchase packages such as a luxury winery tour for $50, uses the same name previously reserved for Facebook’s location-based Places checkin rewards system, now call Checkin Deals.

By serving updates directly to the news feed, Facebook Deals has an advantage over Groupon, LivingSocial, and other daily deals providers who spend millions on Facebook ads in order to collect email sign ups and alert users to new offers. But Facebook is late to join the race and needs to build a subscriber-base from zero. In contrast, Groupon said it expected to have over 25 million subscribers by the end of 2010, and some sources say it has as many as 40 million worldwide.

Luckily, Facebook has a captive audience of over 500 million users to draw from, as well as control over the communication channels that reach them. Facebook can serve ads encouraging sign-ups, like the one shown above, in unused premium ad inventory on its home page. It can also manipulate its news feed algorithm EdgeRank to give stories about friends signing up for Deals high visibility in the feed in order to drive more subscriptions — something it appears to already be doing.

Meanwhile, Facebook needs to register as many local business as possible in the five launch cities so it can pick and choose which Deals to serve. If it can launch the service with highly compelling, valuable social Deals that users are eager to buy and share with friends, user signups and merchants will come flooding in and the service will be a success. However, if first the Deals are insignificant discounts on boring experiences, users and business alike could write off the service.

The marketing emails Facebook sent out include localized information. For instance, since I’m an admin of Pages registered in San Francisco, the email I received stated “Try Deals and get more customers faster than ever. In San Francisco alone, you could reach 3,500,000 people on Facebook.” It also touted the service’s lack of upfront costs, its ability to build loyalty, and that Facebook will assist with marketing efforts.

Facebook is preemptively addressing the chicken-and-egg problem of whether subscribers or providers come first by aggressively recruiting both. There’s no official launch date for Deals, so Facebook can hold off until it has the critical mass necessary to seriously challenged the established players in the group buying market.