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Facebook to Offer Groupon-Inspired Discount-Deal Service

Facebook CEO Mark Zuckerberg
Facebook Chief Executive Officer Mark Zuckerberg. Photographer: Tony Avelar/Bloomberg

March 14 (Bloomberg) -- Facebook Inc. plans to test a Groupon-inspired service that will sell discount offers, an effort to use its 500 million-plus members to capitalize on the surging online-deal market.

The service will get started in San Francisco, San Diego, Dallas, Atlanta, and Austin, Texas, the company said last week in a statement. It will be part of Facebook’s existing Deals program, which lets businesses offer specials to users. With the new feature, Facebook’s staff will work with local businesses to spotlight deals and encourage users to share them with friends.

“Local businesses will be able to sign up to use this feature soon, and people will be able to find Deals in the coming weeks,” the Palo Alto, California-based company said in the statement.

Facebook, the most visited U.S. website, is playing host to a growing array of features, such as movie rentals and location-based services, to keep users focused on its pages -- and the ads that make up most of its revenue. The foray into the deals market could put pressure on Groupon Inc. and LivingSocial, which lead the nascent industry but have a fraction of Facebook’s users.

Daily-deal services, which often target local businesses, will generate $3.93 billion by 2015, up from $873 million last year, according to BIA/Kelsey, a Chantilly, Virginia-based consulting firm.

‘Last Frontier’

“Local is the last frontier that the Internet has not conquered, and everyone is going after it with a vengeance,” said Lou Kerner, an analyst with Wedbush Securities Inc. in New York. “This news is just kind of an evolutionary moment in Facebook’s drive to be a major player in local.”

In addition to offering its own deals, Facebook will let users get discount offers from partner services, including ReachLocal, Gilt City, Tippr, HomeRun.com, PopSugar City, KGB Deals, Plum District and Zozi.

Groupon makes money by selling discount deals to consumers -- say, $10 for $20 worth of pizza -- and then taking a commission on the sale. Julie Mossler, a spokeswoman for the Chicago-based company, declined to comment on Facebook’s project.

The effort follows a plan by Warner Bros. last week to let Facebook members watch the studio’s films. Users click a “rent” icon to see movies and pay the equivalent of $3 with Facebook Credits, the company’s online currency. Facebook gets a slice of sales when credits are used.

Skype Discussions

Facebook also is holding talks with Skype Technologies SA about offering Web video calls to its users, two people familiar with the discussions said earlier this month.

Facebook announced in January that it raised $1.5 billion from investors led by Goldman Sachs Group Inc., placing a $50 billion valuation on the closely held business. Facebook has seen revenue soar as its user base grows and it attracts advertisers such as Starbucks Corp. and JetBlue Airways Corp. The company may have reached $2 billion in sales last year, three people familiar with the matter said in December.

Facebook, founded in 2004, passed Google Inc. last year to become the most visited website in the U.S., according to Experian Hitwise, an Internet-tracking firm in New York.

To contact the reporter on this story: Brian Womack in San Francisco at bwomack1@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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