Last week, Google confirmed it was testing Offers, a group buying site that will see the search giant going head to head with existing group buying sites such as Groupon, Living Social and Groupola, by offering daily discount deals on services and products from local businesses.

Christopher Muhr, Groupon UK managing director, says Groupon has a head start in forming contacts amongst local businesses. The two-year-old company, reported to be the fastest-growing in the world, says it is adding 150 new employees a month to its Chicago headquarters alone.

Muhr does admit that both Google Offers and the Facebook Deals service, launched in the US in November, last year present a competitive threat to the business, and says it would be “foolish” not to take them seriously.

“Market power helps, because Google has a huge email inventory it could tap, Facebook has a great platform to activate people, but the source of power in that space is the merchant, the partner,” says Muhr.

He predicts that Facebook and Google are likely to target larger brands, as opposed to the local links that Groupon has formed through its rapidly expanding sales force.

Speaking at briefing in London today (27 January), Joanna Shields, vice president and managing director of Facebook EMEA, says “our products are always open to anyone who wants to participate”, though a list of US launch partners for Facebook Deals consisted mainly of large and multinational companies.

Facebook vice president of partnerships and platform marketing, Dan Rose, says new Facebook launches such as Deals will always have a “social design”. The company thinks about products “from the perspective of people and their friends first and foremost, and whatever the application is as secondary to that”.

Facebook has also announced the launch of its own group-buying feature, “Buy with Friends”, although it will initially be restricted to the purchase of Facebook credits used in transactions for virtual goods, such as those in social games.