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How Facebook will destroy Groupon and its like, by US social media expert

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By The Drum Team | Editorial

July 26, 2011 | 3 min read

With Wall Street deals lining up, Jay Samit makes a startling claim. In the US magazine AdAge, he says that the daily deals firms such as Groupon won't be able to stand up to Facebook when the social media giant loads up its slingshot.

And while many on Wall Street are rubbing their hands at the prospect of IPOs, he has a startling prediction, in the US magazine AdAge, " Facebook Deals will destroy these couponing giants by loading its slingshot with its own arsenal: Facebook Credits."

Samit is an insider well able to make that judgement. His organisation SocialVibe, a charity-supporting website said to be the "largest engagement advertising platform on the internet," reaches more than 662 million social-media users each month.

In the magazine article, he says, "When Groupon was novel and fresh, millions of consumers opened their morning emails in eager anticipation of what new product or service would be offered -- at an amazing bargain price."

But the thrill quickly faded."It was replaced by the morning chore of how quickly can I delete spam from my inbox." And Groupon and its clones are increasingly being counted as part of the spam problem.

According to Samit, Facebook's first advantage is that it doesn't have to rely on email . "It can insert enticing deals into the targeted news feed of 750 million people."

The knockout punch, says Samit, is that Facebook Credits have the power to make any deal free. He gives the example of a cinema chain offering two adult tickets for only $8, instead of the usual $10 per person.

First enough people have to first open the email to review the offer . Then they must be someone who goes to the movies. Lastly they have to takeout their credit card and buy the tickets prior to their future visit.

"With Facebook Deals, however, the offer can be targeted to people posting or talking about movies on Facebook or sharing trailers with their friends, ensuring the deal is much more likely to be presented to a receptive audience. "

Facebook can also make the offer not in cash , but in credits, which consumers accumulate through a number of different payment models. Exit the credit card hassle.

Samit points out that major brands in the US - from Disney and Microsoft to Unilever and Best Buy already benefit from "value-exchange engagement advertising with millions of people on Facebook on "Farmville" and other social games.

Samit concludes in his AdAge piece, "Groupon may have the early lead in this fight for consumer spending, but the combination of Facebook targeting, credits and value-exchange engagement advertising is the bookmaker's favorite."

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