Foursquare: The New Middleman for Groupon and LivingSocial Deals

If you haven’t noticed, Groupon and its rival, LivingSocial (along with others) have moved past the simple daily deals model. Consequently, the new breed of Groupon and LivingSocial deals (instant deals) are set to change out how customers find out about deals. In anticipation of this, Foursquare has rapidly negotiated deals with Groupon, LivingSocial and others to be the broker of these deals, promoting them based on previous user preference and location.

In truth, your precise location doesn’t matter too much for Groupon/LivingSocial deals of the day. An email would do find as you have months to set aside some time to eat at the restaurants. Things have changed though. Restaurants now can make offers through Groupon Now! and LivingSocial’s instant deals that can only be redeemed the day customers buy the deal. With Groupon Now! and Living Social’s instant deals, on any one day, numerous restaurants in the same area are offering their own deals. It would be overkill for all these offers to show up in one’s email box.

Because Groupon and LivingSocial realize that for these short-lived deals weren’t compatible with email, Groupon and LivingSocial were counting on customers adopting their mobile phone apps. The kings of geo-location Foursquare, now with 10 million users, outmaneuvered them, and Groupon and LivingSocial deals will soon appear on Foursquare. That being said, the instant deals function isn’t available in Foursquare yet, but it is in the plans.With the time frame being much shorter (in the hours) to redeem the offer, location is an important element to see if customers buy the coupon. Location is what Foursquare is good at, and they have captured the big players in one swoop.

There is obvious allure for Groupon and LivingSocial to directly connect with mobile-phone savvy Foursquare users. Yet, if the instant deals services gather momentum (as is very likely), it may be very hard for Groupon and LivingSocial to uncouple themselves from Foursquare. Overnight, Foursquare gained a strong revenue stream and may have co-opted the two major players in the daily deals market.

For someone with a smartphone, it makes much more sense to check instant deals through one app rather than checking both Groupon and LivingSocial. Indirectly, it should bring more deal seekers to Foursquare (a smart move for Foursquare in their war with Facebook Places) as generally the instant deals from Groupon and LivingSocial are more generous than the normal Foursquare ones.

In my view, instant deals will squeeze out the normal deals in urban markets especially for restaurants. The convenience of price loses to the convenience of both price and location (if people start using Foursquare for it). Indeed, restaurant participation will be greater in instant deals as the discounts don’t have to be as steep nor do they have to consume the attention of the restaurant for months afterwards.The flexibility (and reduced risk) is much better than the original model. In the end, if Foursquares’ cut is not exorbitant, Groupon and LivingSocial may blend into each other for the urban mobile phone user. Hopefully, the competition will get more fierce between Groupon, Living Social and upstarts, bringing down costs on these promotions for restaurants.