Facebook Places eats Foursquare’s discount lunch

Author: Chris Nuttall
Date Published: 2011-02-15
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Chris Nuttall from Financial Times reports that MerchantCircle survey results should give the Foursquares of this world plenty to ponder about with their business models as they face an increasing threat from Facebook Places.

Facebook Places, launched just five months ago, already appears to be sucking marketing dollars away from needy location-based startups such as Foursquare and Gowalla, according to a new survey.

Responses from more than 8,000 local business owners in the US to a MerchantCircle quarterly questionnaire also suggest group-buying sites are failing to gain much traction versus traditional online marketing destinations such as Facebook and Google’s AdWords.

Facebook Places was launched last August, allowing members to “check-in” at favorite locations and also be alerted to discounts and deals from their local businesses.

Places imitated Foursquare, Gowalla and other location-based services in its features.

MerchantCircle, which describes itself as the largest social network of local business owners in the US with more than 1.6m members, says responses to its latest survey suggest 32 percent of its members are promoting their business through Facebook Places and an additional 12 percent plan to use it in the coming months.

Foursquare’s usage has risen from 2 percent to 9 percent over the past year, but it has not grown over the past quarter.

While Groupon, which offers discounts from local businesses to group buyers, is being valued in the billions of dollars, only 6.6 percent of local merchants have offered a “daily deal” using its service. However, 13 percent plan to do so, indicating some pent-up demand. They may be put off to hear that 50 percent of those who have run a daily deal campaign said they would not do so again.

The survey results should give the Foursquares of this world plenty to ponder about their business model and the threat from Facebook. They may also be discouraged by the amount of dollars local businesses are willing to spend on marketing, with 72 percent spending less than $5,000 a year and those spending less than $1,000 accounting for 34 percentage points of that.