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Thinking Out Loud: What's Driving Groupon?

By - December 17, 2010

groupon-logo.jpg

In the current issue of the New Yorker, columnist James Surowiecki, who I generally admire, gets it exactly wrong when it comes to Groupon.

He writes:

” But it seems unlikely that it’s going to become a revolutionary company, along the lines of YouTube, Facebook, Twitter, and Google. ….Groupon, by contrast, is a much more old-school business. It doesn’t have any obvious technological advantage. Its users don’t really do anything other than hit the “buy” button. And its business requires lots of hands-on attention…”

Well, that’s a defensible opinion, but after visiting CEO Andrew Mason this week in Chicago, and thinking about it a bit, I must say that I wholeheartedly diasagree.

Many folks think of Groupon as a relatively simple idea. A daily deal, a large sales force, and that’s about it. Too easy to copy (there are scores of “Groupon clones”), and too labor intensive (the more small businesses you want to work with, the more sales and service people you need).

All this is true. But it fails to understand the power of Groupon’s model. To sum it up: Groupon has built a new channel into the heart of the the world’s economic activity: Small businesses. And it is that channel where the true power lies.

First, the economic math: Small businesses create more than 50% of US GDP and create more than 75% of net new jobs each year. But small businesses represent a fragmented, maddeningly difficult sector of our economy – 23 million small pieces loosely joined. Any platform that has connected them and added value to their bottom line has turned into a massive new business.

yellow-pages-logo.gif

Over the past century, there have been two such new platforms. The most recent is Google, a proxy for the rise of the web as a platform for small business lead generation. Before that, it was the Yellow Pages, a proxy for the rise of the telephone as a platform for lead generation.

Groupon, I believe, has the potential to be a new proxy – one that subsumes the platforms of both the Internet and the telephone, and adds multiple dimensions beyond them.

I know that’s a stretch, but hear me out.

First, let’s review the Yellow Pages. What is it? Well, for the most part, it’s a paper-based publishing platform that combines a curated local business phone directory with advertising listings. Nearly every single small business with a phone number is listed in the Yellow Pages, and a large percentage of them also buy advertising to promote their wares as well.

In short, the Yellow Pages is a platform that connects every single consumer with a phone to every single local business with a phone.

As a business, the Yellow Pages consists of folks who manage the listings and produce the books, as well as a very large sales force which calls on local businesses. Once a year, the product turns over, and a new book is made.

That’s it. Simple (and certainly not technologically defensible), and while it’s clearly in decline, the Yellow Pages is currently a $15 billion revenue business in the US alone. Now, the Yellow Pages is also an online business, but they were late the party, and have pretty much lost to Google when it comes to the platform play.

Google represents a second new platform which connects consumers and small businesses. Many forget that it was small business that drove early adoption of AdWords (as well as Overture, its early competition). And while not every small business is yet online – 36% of US small businesses still don’t have a web site – a the clear majority of them do, and milllions of them use AdWords, as well as organic search, to drive leads to their business. Google makes billions of dollars leveraging its platform, which, by the way, has subsumed the Yellow Pages business and grown well past it into any number of other markets, including most major international regions.

Google alone is on a $30 billion revenue run rate, and it’s only ten years old. That’s twice the US revenues of the Yellow Pages, which were built up over more than 50 years.

So to review, the Yellow Pages leveraged the telephone to create a massively scaled and profitable platform connecting consumers and businesses. Google did the same, but leveraged the Internet (and subsumed the telephone as well).

And Groupon is doing it again, subsuming the telephone, the Internet, and leveraging an entirely new platform: the mobile web. google_logo1.jpg

Now, before you yell at me and claim that Groupon is anything BUT a mobile-driven company (the company sends email to 40mm US subscribers, for example), recall my definition of mobile is a bit more complicated than most.

Remember MOLRS? As I said in that post: “if you are going to think about mobile, you have to think about social, local, and real time.” In short, mobile is meaningless without context: Where someone is (or is about to go), who someone is with (or about to go meet), and why someone is where they are (or with who they are with). And, of course, when someone is where they are (and with whomever they are there with…).

Whew. Sorry, but you get the picture.

Now, let’s think about MOLRS in relation to small business. First, small business owners (SBOs) care deeply about location. Are they in a good location? Will customers be able to find them? Is there parking? A good neighborhood? Strong foot traffic?

Second, SBOs care deeply about relationships and word of mouth (or what we will call social). Do people refer their friends and family to the business? Are people happy with the service? Will they say nice things?

Third, SBOs care very much about timing (what I call “real time” in my MOLRS breakdown). What are the best hours for foot traffic? What are the best times to run promotions? How can I bring in more business during slow times? How does seasonality effect my business? When should I have a sale?

In short, SBOs are driven by local, social, and real time.

Turns out, so is Groupon.

Now, ask any small business owner what they wish for more of, and they’ll give you a resounding answer: More customers. It’s why they pay for the Yellow Pages ad, and it’s why they buy AdWords from Google.

And it’s why they are starting to buy Groupon’s product, at a breakneck pace. Sure, some of them buy too much of it, or fail to do the math and lose money on the come. They’ll adjust, and if they don’t, smarter SBOs will eat their lunch, and the world will move on.

To my mind, the proof is in Groupon’s growth rate. I’ve never seen anything like it – well, since Google. And just as Google lapped the Yellow Pages in a fraction of the time, Groupon seems to be on track to do the same to Google.

Good sources have told me that Groupon is growing at 50 percent a month, with a revenue run rate of nearly $2 billion a year (based on last month’s revenues). By next month, that run rate may well hit $2.7 billion. The month after that, should the growth continue, the run rate would clear $4 billion.

Google’s run rate, when revealed in its IPO filing six years ago, was staggering – it grew from under $200 million to $1.6 billion in less than three years. Groupon is on track to do the same – but in less than one year.

That’s pretty extraordinary. But remember, Groupon has figured out a way to deliver what SBOs want most: more customers in their stores. And unlike Google or the Yellow Pages, Groupon doesn’t sell advertising. Instead, it takes 50% of the actual revenue driven by its platform. Trust me, that’s potentially a much bigger number.

Actually, it’s pretty interesting to see how the business model of driving leads to business has shifted as each platform has risen to dominance. The Yellow Pages charge a set price for a display ad, with no guarantee that the ad would drive any leads. Google turned the model upside down, and charged only when people clicked on the ad. Groupon doesn’t charge anything at all: It simply takes half the revenue generated when a deal is fulfilled by its platform.

So to summarize, I think those who claim Groupon’s business is too simple are focused on the wrong things. Sure, there are other deal sites. But none have Groupon’s scale. Sure, Groupon’s model of one deal in one city on one day is limited, but it’s easy to see how the product scales against category, zip code, time of day, and many other variables. And sure, Groupon has a lot of people who have to touch a lot of businesses and a lot of customers every day. But to me, that’s the company’s strength: SBOs are in the people business, and therefore, so must Groupon be.

And this, to my mind, is why Facebook or Google can’t compete with Groupon. Imagine Facebook or Google with 1,000 people who do nothing but talk to customers all day long? Yep, I can hear the laughter from here….

While I was visiting earlier this week, CEO Mason told me that a significant percentage of Groupon’s customer service reps are members of Chicago’s vibrant improv scene. That makes sense to me – if you are going to deal with possibly upset people all day, it helps to have a culture of humor and thinking on your feet.

That culture will serve Groupon well as it attempts to deal with world record-breaking growth. While there is no certainty the company won’t blow its lead, it’s already a major international player. And while Mason would not comment on the rampant speculation over a $6 billion offer from Google that reportedly fell apart last week, in the end, it may be that the idea of Groupon being purchased by Google is as silly as the idea that the Regional Bell Operating Companies, who originally had the monopoly on the Yellow Pages market, could or should have bought Google.

In the end, it wouldn’t have been a fit.

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47 thoughts on “Thinking Out Loud: What's Driving Groupon?

  1. Harry says:

    There are literally thousands of categories in the yellow pages, not all of them are “Groupon-able” whereas Google still has a considerable advantage for the classifying, mapping and rating of all SMBs (ie, plumbers, divorce lawyers). Flyers, Entertainment Book and Valpak are the ones getting kicked in the pants here.

  2. Kevin says:

    Groupon’s margin is way way way way lower than google’s, so revenue is not a good metric. Groupon has yet to build a massively profitable business with a giant core of repeat customers. I think you’re wrong, John. To be like google, you need massive, high margin, and repeat customers. Groupon has one of these three.

  3. gregorylent says:

    groupon = coupon books 2.0 … useful but not heroic

  4. Charbax says:

    Groupon’s rapid growth can just as well presage of its rapid downturn. Turning down a $6 billion exit would be crazy.

    Just like if facebook is offered $40 billion from microsoft, they should definitely take it. Facebook can be replaced by any other social network any minute.

  5. Killian says:

    Groupon is building a staggering amount of value. Very little is “technically” defensible today. Those looking for the value in the technology portfolio are looking in the wrong direction. When Google arrived it was technically wowing – today new search engines arrive regularly and are boring. Google’s success is not as much in the technology anymore as it is in the constant tuning of their mix based on experience. Groupon’s value is the same, they are in the business of merchandising based on their own proprietary data gained off all of their deals. It’s 100% defensible and technology just enables it.

  6. RV says:

    Google is the dominant player in search advertising .Bing/Yahoo comes a very distant second.

    I dont think

    Groupon has Livingsocial a close second ( & growing)along with other 3rd tier players .
    There are so many other clones that serve the gamut of niches ( moms,outdoor sports etc etc),that i think the daily deal landscape is more akin to ecommerce landscape ( with a few leaders and other smaller niche vendors).

    It surely is not a winner take all market.

  7. George says:

    Interesting parallels drawn between Groupon, Google and Yellow Pages and the relative contrast in platforms and business models.

    I support John’s point; essentially, Groupon is developing quite a rich value chain with their service model – direct relationship with consumers (email address) and SBO’s (value network – revenue splits). This could be disruptive to Google if contextual search becomes less durable.

    I agree with the thesis and perhaps this outlines the strategic underpinnings behind Google’s overtures to acquire Groupon. However, my one concern here is whether the Groupon model is defensible; Google already possesses many of the needed assets – gmail, buyer platform, resource capabilities and other properties that could replicate or even enhance the service delivery system. Next steps should be interesting…

    Thought provoking piece!

  8. Andrew says:

    The only thing that would kill Groupon is selling to Google. Google only understands automation and sales teams is against Google’s DNA. I don’t think Groupon would succeed within Google unless Google left then independent but history has proven Google thinks they always know best. Groupon has one problem… not being able to serve all businesses that want to use their platform. Now, if they figure out a way to accommodate these other businesses.. Goupon will no longer be Groupon. This is a big problem. So they will have a growth problem down the road… but it’s only a problem if they need to answer to wall street. They will be fine if private.

  9. Best Hubris says:

    There are two very important things missing from this analysis. First, and foremost, all of those “clones” out there are small time. We’ll see if Groupon is a sustainable business once a big name player decides to actually invest in building a competitor.

    Second, Groupon is looking to raise even more money. That means that for all of its growth and revenue and market share, it still is not generating enough money to turn a profit. Goodwill and happy thoughts won’t last forever.

    WG

  10. Mike says:

    I agree John – great observations. With it’s cash, lead and reach; I think Groupon will own a percentage of SMB. I can image some enterprise companies and certainly retail companies offering group buys, some day, through Groupon.

  11. First they ignore you. Then they laugh at you. Then they fight you. Then you win.

    As John points out, everyone (including most of the people on this board) continue to poohpooh the model. Yet, they continue to explode with growth and revenue without any challengers.

    Groupon’s laughing all the way to bank.

  12. Great article!

    The big weakness I see in Groupon’s model is that they don’t do a good job with “time for money” businesses.

    If you own a massage therapy business and “sell” 1,000 massages for $15 each instead of $60 … well, give me a call next year after you’re done honoring all those massages.

  13. scott gjerdingen says:

    I respect your thinking but I don’t have the faith or belief you do. I thin Groupon should have taken Googles check and cashed it as fast as possible.

    So far Groupon has only served me in a personal way that is annoying and I wish i had never put my self on their subscriber list. Offers are lame, esoteric, ill timed, etc. I wish them the best, but sadly I believe this is behind them.

    - scott –

  14. JoeTierney says:

    Groupon may see tons of competition but they can still realize continued success by being the best. Customers obviously see value in the model.

    Groupon offers a way to get customers in the door, the business is given a chance to win a new customer – given a chance to make a lasting impression.

    If they continue to execute, they’ll continue to be successful. If you’re running your own shop and enjoying the ride why would you sell?

  15. Rory says:

    Groupon and similar sites like LivingSocial are a very popular trend. With the increasing number of deals offered, buyers can just visit a daily deal aggregator like http://www.shopway.com to check all the available deals easily. One of the problems Groupon facing is that it’s the product or services that the buyer cares the most. As a user, it makes absolutely no difference to me if I get an email from Groupon, LivingSocial, or ShopWay telling me about a deal, since I’m after the deal itself. With all of these clones coming up, Groupon’s model runs the risk of becoming a commodity.

  16. Steve says:

    Very interesting John, but I don’t think you’re correct in drawing a linear evolution from YP -> Google -> Groupon. I think it’s more like YP breaking up into 2 constituent parts, and the breakup happening at 2 different points in time.

    Lots and lots of the small businesses who advertise in the Yellow Pages do NOT use Google. The local plumber, the corner restaurant or grocer, the neighborhood dry cleaner, etc. And that is precisely why Google has been failing at LOCAL for so long. They’ve been doing great with “small business”, but not so much Local Small Business. You correctly point out that this is why Groupon is eating Google’s lunch in this category.

    It’s not that, as you say, “Google’s platform has subsumed the Yellow Pages business.” Rather, Google has subsumed a component of the Yellow Pages business. Now, another player (Groupon) has come along and is subsuming another component of the Yellow Pages business.

    And, of course, there are lots of other traditional local advertising sectors (coupons, Sunday circulars, newspapers in general, local “avails” on cable TV) who will be impacted by Groupon and the new wave of local advertising. Not just Yellow Pages, and not just Google.

    And that’s why Groupon is potentially such a massive company.

  17. John says:

    Mr. Schmoe – I had not seen that piece, but that only proves folks can have similar ideas apart. Though had I copied that post, I’d have made the point he did about Facebook. I’d not have agreed that Groupon is mostly a coupon play.

  18. Andrew says:

    I think you’ve taken James’ article out of context. He points to the fact that when it comes down to it Groupon is not a sexy business when compared to YouTube or Facebook… But that lack of spunk doesn’t mean it can’t be a heavy weight. You should provide a better context here for your readers John.

  19. Dale says:

    Signing up for Groupon = Signing up for SPAM!

    Why?

    Personal experience: I signed up for Groupon, and got daily spam, so I signed off.

    The essence: How and how frequently do you use coupon books you get in the mailbox? I used to save a book for oil change coupons years ago and then, ah, yes I “search” for it “when I need” to change oil.

  20. Navneet says:

    Groupon’s revenue is soaring. So, its hard to argue against numbers. But something doesn’t feel right about their model. They don’t do a good job of matching what people want and when they want it to what vendors want to sell. Like Google matches the intent of people doing the search, Groupon doesn’t. It is hit or miss as can be seen from some of the comments here. But, revenue is soaring, so hard to argue against numbers. Probably, the real question is what could Groupon or one of its current of future competitor do differently to address this point and will that make a difference.

  21. Andy says:

    That’s a great point that Groupon is tapping the latent power of the small businesses. It’s also allowing some to really ramp up their national marketing reach. I noticed so many groupons that you can use online or nationwide that I started http://www.groupongroupie.com to try to find the deals from other cities that I can take advantage of. For real deal-hounds, there are a lot of deals in other cities to be found.

  22. Perry says:

    I’ve referred to GroupOn as a “blunt instrument”, and I think it’s a useful context. The model maps poorly onto many small business categories, where control over time and quantity of customer flow represents the difference between profit and loss, and large scale customer flow can readily backfire on their brand.

    The business, delivery and coverage models of Daily Deals are all in need of refinement in order to sustain a position as central as you propose. All of these changes come with major risks in execution.

    I do agree, based on what I’ve read about the 2.0 vision of GroupOn, that their ambitions are in the right place. However, you assume their product has created a market position which has made them the darling of SMB’s. I don’t agree; A 1-2 times campaign offer interaction doesn’t make a relationship.

    Today’s SMB gets 5-10 calls as soon as they do a GroupOn, from competitors offering to do exactly the same thing with them, next time – cheaper and with less volume/scale problems. Many of them are wandering from Daily Deal to Daily Deal – because it’s the model they love, more than the brand, and because the experience is still full of structural problems.

    The potential is most certainly there, but I think the refinement of the instrument into the “yield management engine” you describe will be an order of magnitude harder on execution.

  23. David Urech says:

    Groupon solved the small & mid size biz marketing problems.

  24. Jay Ehret says:

    John, First question: Did you or Andrew Mason write this post? :)

    Unfortunately, I can agree with very little you say here. And you say lot, so I’ll concentrate on this:

    “Groupon has built a new channel into the heart of the the world’s economic activity: Small businesses. And it is that channel where the true power lies.”

    That’s the problem. The model is not good for small businesses. It’s good for Groupon and the customers. It’s really a model better suited for big brands to drive traffic. Brands that have long ago abandoned brand-building in favor of growth for the sake of year-to-year sales reports.

    The Groupon model is bad because it forces small businesses to devalue their brand while giving up 75% of their gross (under the current Groupon model). So that leads to “deals” like the current one listed in Austin today: $23 for four tickets to the University of Texas Men’s basketball game. That’s 50% off the normal price. Great deal, right? Until you read the disclaimer: Those are two tickets to two separate games, one of which is Coppin State on December 30th, a game that was unlikely to draw any fans other than season ticket holders. Really, the buyer is just paying full price for tickets to the Arkansas game, and getting free tickets to a game that no one wants to see. It’s a deal that games the system.

    That’s because few businesses can afford to give up 75% of their gross. They actually lose money on each sale. Groupon has a model that’s bad for small business.

  25. Jorge says:

    John, thoughtful post as (pretty much) always.. kidding! :).

    One point: sbo’s do care about location, social and real time. but do you know what do they care about the most? profit per unit, whether they’re dollars or cents.

    If I as an sbo have to leave 30% plus percent for a deal to fly on groupon, this means that sbo’s are selling at cost price or at an outright loss.

    Yes, i’ve heard about loss leaders, but if i am guided by the thought that groupon is the marketing channel of choice, the profit effort i anticipate is far too much to bear sustainably.

    So when the acquisition costs are too high, then groupon loses shine when it loses sponsors or discount themselves. That’s their biggest risk

    Regards

  26. John,

    Thought-provoking post – thanks. I’m intrigued by a statement you made in response to one of the comments: Groupon is much more than a coupon play.

    Can you draw that out a little bit in a future post?

    ‘Cause if it’s *just* coupons, I think there are significant downsides to Groupon’s business model:
    http://sparkplug9.com/are-coupons-the-future-of-local-e-commerce-really/

  27. Groupon runs the risk or alienating its business clients when those signing up for a Groupon campaign over estimate how many regular customers they will gain, and do not understand that the item they are discounting is only a loss leader. watch more at http://malcolmoutloud.tv/index.php?shw=238&seg=b

  28. Barry says:

    Great article and it seems to have generated some good dialog. As a SBO that used Groupon and has used others such as Deal Find to do the same type of marketing I must say that Groupon does not have anything that will distinguish it from competitors. They have come out of the gate fast and captured a large market share however any existing company that has a large social group and is looking to add a revenue to their company, think Twitter, Craig’s List and Facebook, could easily mimic and improve the Groupon offering. This is because their technology is not revolutionary whereas Google and Facebook did just that when they entered the market place, they revolutionised how people do things. Today’s technology companies need to know if their product needs to have a technological advantage and in the case of Groupon it does not have this this opens the door for competitors that can develop and promote to their existing users a similar or even better offering. Some companies that could go down this road and be successful are Google, Twitter, Facebook, MySpace, Yahoo, Bing, MSN, Craig’s List and even PayPal to name a few that have both a large business and social following with access to emails so it is crazy and a bit arrogant for a company as young as Groupon to not take the 6 billion and work with an organization such as Google. For the record we have done Groupon and currently use Google Ad words, Facebook, Craig’s List and even Twitter as a form of marketing our business the only thing we do not use is the Yellow pages so that much of your article I can agree with.

  29. Sam Wired says:

    Nice that Groupon has improv stars manning the phones: how many cities can that be repeated in? Also, am sure their sales force is concentrating on big city low hanging fruit, and one deal a day per city puts ceiling on growth from there… I’d expect quickly slowing growth as they expand to smaller cities AND as merchants are fed up with collecting 25% of their normal fare on these deals (i.e., Groupon gets half of the 50% discounted price).

  30. Mark Bossert says:

    All the Groupon love aside – run the numbers. For the vast majority of small business, Groupon makes no sense! If it’s a $100 item or service the retailer nets out @ $22 per sale. For a service business, you’re selling at a loss to both current and new customers, eating your capacity for profit. Why? Any justification about losing money in order to get access to new customers is silly – you’re still losing money on every sale dude… You have to max out your conversion of new to ongoing customers… and how easy is that when you have a flood of new bargain hunters pounding your staff into submission?

    Groupon sells 2200 of your product or service and you’re putting your business into a precarious position. Be very careful!

    Unless you have a seriously overpriced product that you can still be cash positive at the very reduced amount you’ll net -and- deal with the influx of customers without pissing off your regulars, it might make sense. I don’t see how it can ever work for a service business. Restaurants that are excellent already – maybe.

    No one talks about how discounting conditions your clients to wait for the next deal. You decrease your perceived value, and get zero branding in the process. Groupon gets the branding – not your business.

    Groupon is great for Groupon — and for deal chasers. Not really a great market for a small business.

    Here’s the rub… How does Groupon keep growing once the word starts to spread that your business will be going tits up after your Groupon “experience?”

  31. Zachary says:

    A golf coupon for a round not valid before 11am Fri and Sat or a massage… It’s like a digital version of the Entertainment book – pointless deals that I would never otherwise purchase… I think Groupon will wish they would’ve sold for 6billion in

    I see the potential for sure – but I think another big player will figure things out before these guys get a chance.

  32. Mike says:

    Groupon takes 50% of a heavily discounted “price”, so the final take of the small business might be only 25% of their service/good’s face value.

    How is that sustainable going forward?
    Gross margins aren’t that high in the small business world.

    Sure, you chalk up some of it to an investment… but still, I can’t see how both Groupon and the small business can make money at the same time.

  33. SIA Training says:

    Today’s deal of the day for my city was from a day spa and after all the discounts and Groupon fee they were making a sale in £17 whereas normally it should cost £88. I wonder how is the seller going to make them any money?

  34. cson43 says:

    Hey.. this is a good one..it seems the author knows the subject well. It is a good site indeed. Liked it.eh.. good one. )).

    http://bergstrom-seo.com/

  35. kiem says:

    When Google arrived it was technically wowing – today new search engines arrive regularly and are boring. Google’s success is not as much in the technology anymore as it is in the constant tuning of their mix based on experience. Groupon’s value is the same, they are in the business of merchandising based on their own proprietary data gained off all of their deals. It’s 100% defensible and technology just enables it.

  36. I couldn’t agree more.

    Local advertising space for small companies will be one major trend for 2011, and will make some good money too.

    Groupon has managed to incorporate this in a simpel but effective business model, and conquering the world right now!

  37. Jt Placement says:

    John,

    I’ve got to respectfully disagree about Groupon’s long term, and absolute control of this “new” paridigm.

    One has only to look at IE and Firefox. Let me ask all of you here today-would you pay $10 for Firefox?

    Head start only, IMHO.

    Then again, I’ve been wrong before, as I bet Mike and Mark have.

  38. Chris says:

    Today’s Groupon in SF is for a portrait guy in Sausalito. A lot of other days it’s for paintball wars, skydiving, etc.

    I think that Groupon is good for things that are “the spice of life” where you’re signing up for something you wouldn’t normally do, like get a portrait of yourself or your family, and when it’s $95 instead of $615, you figure “why not?”.

    From the vendor perspective, it’s great that they can get more customers, but it seems like a lot of the vendors are for people who sell things that are high margin and have a lot of spoilage, ie once Saturday comes, it doesn’t matter how many people are on the paintball field (within reason).

    I recently moved to Ross (can I see your poolhouse when it’s done?) and I need a dentist. Groupon isn’t helping me with that, but they yellow pages or Google might. To find a dentist, I’m going to ask around (know a good one?) or go to Yelp, though I am leery of Yelp’s “pay us to get your negative reviews removed” business model.

  39. Small Business Owner says:

    I have to disagree with this article mainly because I have delved into Groupon’s business model more in depth and looked at the issue related to offline marketing campaigns that were similar in the 90′s. The main problem with Groupon’s model that has yet to be discussed publicly is that these deals are all playing psychological games on the consumer in terms of pricing. I have watched and monitored many of these deals since Groupon started.One major similarity is obviously the fact that they are selling the fact that the Discount is a substantial savings over the regular price. Well the issue here is and again is something that was very common in the 90′s was overpricing inventory or services and then discounting those items or services in a huge way to give the purchaser or consumer the idea that they were saving BIG. Well the competition Bureau came in and said “Hey wait a minute this is false advertising, You have to prove first that the retail price was in fact what you say the true value was” You cannot simply advertise a pair of shoes as On Sale for $50 regular price $100 and show a discount of 50% if in fact those shoes never retailed for $100, Most likely they were retailed and listed for $70. So the actual discount is actually less than 30%. What is essentially happening is they are duping consumers in a lot of cases (not all) into believing that they are saving a lot of money. Again this has happened before and it takes the public or consumer awhile to figure this out.

    I expect that this FAD will end in the near future it will not be eliminated entirely but probably still exist on a much smaller scale with more reasonable deals that are truly honest deals. Consumers or purchasers beware

  40. usgets says:

    I think groupon is not a good idea since they got much benefit for theme self, but how about us? thsy should re-arrange their system for a better way.

  41. Groupon’s success indicates the power of email marketing. The company transfers the door-to-door salesman to one’s inbox. It acts as a marketing firm to assist small businesses by increasing their sales and building their brands.

  42. From the vendor perspective, it’s great that they can get more customers, but it seems like a lot of the vendors are for people who sell things that are high margin and have a lot of spoilage, ie once Saturday comes, it doesn’t matter how many people are on the paintball field

  43. Groupon is clearly all about their own interests with zero retention rate. Clearly their business model won’t last long. In fact, one of my ‘groupon stores’ requires 25 followers, we’re at 21. Who’s to say they’ll even agree to run your promotion to their network if it doesn’t make them the most money?

    I’d like to introduce this unique website http://www.MeetABusiness.com, which has been in the works for about a year with 2 other business partners. We do not charge businesses an arm and a leg to offer group coupons, like all the rest of the group coupon sites do. Ours doesn’t charge them anything except for the $9.95 monthly membership fee and a small extra fee if they want to purchase a deal of the day, week, or month, but the first 6 months are free, plus they get all of the other posting and searching benefits offered by the site, which the other group coupon sites don’t offer, such as business resource posting & searching, jobs posting & searching, events posting & searching, networking, and blog posting. The deal of the day feature I think could help you eliminate the ‘expiry’ issue you had with Groupon. Plus you’ll get a free long term backlink in our directory.We have over 300,000 business listings nationwide to date. Again, we are a low-cost alternative (at the moment we’re a “no cost” alternative because we’re free for 6 months) to all of the other group coupon sites that everyone complains are really bad for businesses, because they take so much of the pie from businesses.If you have any additional thoughts, comments or suggestions for the site, we are all ears. Would sincerely appreciate a plug from you on any of your network of sites.

    More at: http://jamiebeckland.com/2011/01/groupon-locusts-and-the-coming-small-business-apocalypse/#ixzz1PVEMXViS

  44. Good post. It is really help to us. Its give us lots of interest and pleasure. 

  45. Johnyaeger85 says:

    So many things have changed in the past 6 years or so since it was launched and so many conclusions have been made too. Whether bad or good. What’s important is we learn and that makes us formidable.

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