First, let me reiterate that I have said from day one that the whole GroupOn/Living Social business model is a flawed one. Not only does it fail to attract valuable customers to most businesses using the coupons, but companies give up too much for the new customers it attracts and actually turns existing “profitable” customers into bargain shoppers.

None of that matters now anyway. Launching tonight in five cities (San Francisco, Austin, Dallas, Atlanta and San Diego,) Facebook Deals is about to put a serious squash on these couponing plays.

#1 reason why Facebook Deals will dominate? They will likely offer the deals for FREE! Yes, they launched Facebook Deals in Europe and the model was to give away the deals and make their money off selling Facebook credits. Heck, even if they make nothing off the deals, they could give it all away for free just to crush the competition.

A close #2 to why Facebook Deals will destroy? Their demographics. No one in the history of history has put together such expansive demographic information on consumers. Why toss bucks at a big, messy email list when you can target the demographics “facebook style.”

Mark it down. GroupOn and Living Social’s days were numbered even before Facebook Deals, but now they will have to reinvent themselves completely while bleeding money to even stay in business period.