• by Mark Walsh  @markfwal, April 26, 2011

Facebook launched a new local deals service Tuesday that allows users to get special offers and discounts directly through the home page as well as email and notifications. The new feature (not to be confused with the mobile check-in Deals Facebook launched last year) is being tested initially in five cities: Atlanta, Austin, Dallas, San Diego and San Francisco. It will eventually be extended to other cities.

The initiative reflects Facebook's efforts to compete more directly with popular daily deal services like Groupon and LivingSocial. With its more than 500 million users worldwide, the social network clearly has the potential to drive significant business for merchants and become a major player in the space. The daily deals market is expected to reach $2.7 billion this year, according to a recent forecast by Local Offer Network.

Through its new offering, Facebook users have the option to buy, share and "Like" deals. One example the company highlighted in its announcement is a promotion from Austin City Limits for an "All Access Experience" for concerts starting next month; it includes backstage passes, sound check access and a catered dinner in addition to attending the show. The idea is that the deals will not just be about getting discounts on products or service, but taking advantage of "interesting experiences" in your area.

Facebook is working with a host of third-party partners to syndicate deals including Opentable, Gilt City, Tippr, PopSugar City, Plum District, ReachLocal, Zozi, Home Run, KGB Deals, aDealio, and ViaGoGo.

For Facebook users who have listed any of the five pilot cities as their "current location," a new Deals tab will appear on the home page to find offers. When it comes to buying deal coupons, Facebook is planning to include its Credits virtual currency as a payment option, in addition to credit cards.

Facebook began promoting the new deals service last month through a special "coming soon" message that appeared in users' news feeds, urging them to subscribe to get updates about offers and invite friends to do the same. It also set up an informational page for businesses interested in providing deals.

Facebook unveiled Check-In Deals in the U.S. for mobile users in connection with the launch of Facebook Places last November. But the feature has yet to gain widespread adoption by businesses, according to the Inside Facebook blog. That suggests the broader deals program kicking off today will not necessarily have an immediate impact on Groupon or LivingSocial. As its expands deals to other cities, however, Facebook represents as a growing threat to their dominance.