Facebook’s Latest Acquisition Aimed at Improving Local Deals

Facebook’s acquisition of Rel8tion, a stealth-mode startup out of Seattle, may hint towards the social network’s growing interest in the local advertising space. Rel8tion was developing a system for matching up a person’s location and their demographic profile with relevant ad inventory, according to AllThingsD, which was able to pull a bit of information off the startup’s website before it turned into the mysterious black page that it is today.

While Facebook won’t officially confirm what its plans are for Rel8tion’s technology, it’s pretty easy to decipher: location-based advertising. On mobile. Using your Facebook profile info.

In fact, speaking at the Inside SocialApps conference yesterday, Facebook CTO Bret Taylor confirmed the company’s primary focus in 2011 is mobile.

Granted, Taylor wasn’t talking about local mobile deals, specifically, of course – he was talking about Facebook’s challenges and success on the mobile platform in general. But these phones, explained Taylor, are inherently social. They’re filled with your friends and contacts. And they have access to location.

Sounds like the winning formula for a local mobile deals platform, doesn’t it?

Facebook Places As It Is Now

Facebook actually already has a location-based mobile platform in place called Facebook Places, which, like similar mobile services provided by the likes of Foursquare and Gowalla, allows you to check-in to a location and share that activity with your friends. On Facebook, there’s even a viral element to the service that others don’t have – it incorporates the concept of tagging, made popular by a Facebook photo-sharing feature – into the check-in process. You can now check in your friends on Facebook along with you, even if they don’t do it themselves.

More importantly, though, are the deals offered by Places. Thanks to Facebook’s reach – over 500 million active users, and 200 million mobile users – Facebook can easily grab the attention of brands and their customers.

When Places launched last fall, for example, one of Facebook’s partners in the launch was Gap. The clothing retailer dipped their toe into Facebook’s new local deals market by offering its customers free jeans, 10,000 pairs. But the promotion caught fire on Facebook – Free jeans! Tell your friends! – and quickly turned explosive. Lines formed around the block in the early morning outside Gap stores, and all the free jeans were given away within minutes after opening the doors.

Facebook Deals: Mobile, Local, Social, Targeted

Now imagine that same kind of viral, socially-infused power, combined with a “daily deals” model, the likes of which many major tech companies have been pursuing as of late. Then imagine Facebook Places deals that were designed to match up not only your physical location, but also your demographic info, made available thanks to your Facebook profile.

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Welcome back to the Gap! How did those assorted tank tops work out for you?”

A scene from the movie Minority Report with Tom Cruise, shows a future where holographic images pitch you personalized deals as you enter a store; one, coincidentally, from The Gap. It’s eerily foretelling. The only difference is that in the near future, you’ll be pitched via your mobile phone instead. And the offers will come by way of demographics you’ve willingly shared for free in exchange for online photo-hosting services and status-update-filled News Feeds.

Everyone Wants Deals

Facebook isn’t the only major company wanting in on this local mobile action, either.

Groupon, which shrugged off a $6 billion Google acquisition attempt is reportedly planning an IPO at a $15 billion value, according to Bloomberg. The company also recently raised, as its kitschy press release says, “like, a billion dollars.” (Well actually, it raised $377 million in new equity; $573 million was used in stock buy-backs.)

Groupon’s spurred suitor Google quickly began work on Google Offers, a similar local deals type service. Although still unofficial, sample offers began showing up in Google’s search results yesterday. (“Groupon? We can do that,” says Google.)

Amazon, too, is chasing the local deals market with LivingSocial, a daily deals service of its own. Amazon actually invested $175 million into the site, but did not acquire it outright. A recent promotion where Amazon offered $20 gift cards for $10 showed that the power of the local platform can even be used to sell non-local goods and services.

Even online auctioneer eBay is going local, with its acquisition of Milo.com, whose local deal-finding service is now incorporated into eBay’s mobile app and other online properties.

Who Has the Winning Formula?

Will any one company come out on top? For Facebook, going local isn’t enough – it wants local plus social plus targeted. Facebook already uses your demographic info to customize websites through Instant Personalization, it’s now using your Facebook activity to show ads to your friends, so is it any wonder that it would want to use your profile data to pitch you local deals via your mobile phone? Not at all. If anything, it’s surprisingly late to an already heated game.

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