Groupon, a case study in stupidity?
 

http://www.chicagotribune.com/busine...,1451396.story

Groupon and its compatriots in the much-hyped daily deals business were supposed to change the very nature of small-business advertising. Instead, it is the daily deal vendors that are racing to change as evidence mounts that their business model is fundamentally flawed.

Groupon last week reported another quarter of disappointing earnings as its core business stagnated, sending its stock down 30 percent to an all-time low of $2.76. They were down another 14 cents in early morning trading Monday.

Its biggest rival, Living Social, is piling up losses, and part-owner Amazon.com earlier this month recorded a quarterly loss after writing down its Living Social investment.

Both companies are racing to diversify, venturing into more generic ecommerce areas like off-price sales through ventures such as Groupon Goods and LivingSocial's Shop. Meanwhile, upstarts are developing new variations on the discount coupon theme.

"It's clear that they need to have other models besides the email daily deals business," said Aaron Kessler, an analyst at Raymond James. "The problem is that a lot of these newer businesses have lower margins."

Critics say the torrid growth that enabled Groupon to go public at $20 a share just a year ago was fueled by merchants buying into a new type of marketing that they didn't fully understand. The discounts offered through the Groupon coupons have turned out to be costly, and the repeat business they generate uncertain.

"A lot of people made the mistake of overlooking the price-promotion part of this model," said Utpal Dholakia, Professor of Management in Rice University's Jones Graduate School of Business. "Normal advertising, yellow pages advertising, it really doesn't have a price promotion, it doesn't have discounting component. That's what makes this difficult to do again and again."

A Raymond James survey of roughly 115 merchants that used daily deals services during the fall found that 39 percent of merchants said they were not likely to run another Groupon promotion over the next couple of years. The top reasons cited were high commission rate and low rate of repeat customers gained through offering a promotion.

The survey also found that 32 percent of the merchants reported losing money on the promotions, and nearly 40 percent said the Groupon offer was less effective than other types of marketing.




http://mashable.com/2010/12/03/groupon-google-no/

Groupon has reportedly rejected Google?s massive $6 billion acquisition offer and intends to stay independent.

The group-buying giant has been the center of the tech world this week after it was reported that Google had offered it $5.3 billion with a $700 million earnout. According to Chicago Breaking Business and Bloomberg, Groupon has decided that it is better off on its own


I'm betting Google is happy they declined :1orglaugh

Groupon could only screw over the merchants for so long......

Yeah, Groupon fucked up big time by not taking that offer from Google :2 cents:

Never used it. Don't even really know what it is. Group-coupons? Whatever..

They mislead sellers telling them it costs nothing when it costs 50% of every sale and the only way you will make any of those sales is to offer a big discount in the groupon campaign. Customers don't want to then buy again at your normal price.

a lot of merchants lost some good money on the groupon campaigns ;)

I totally agree, should have jumped at the money, look at other sites like Myspace, who were once at the top.... makes me wonder about Facebook, 5 years from now maybe something else comes along

They didn't limit the type of business which hindered the advertising businesses.

For instance, I get a pedicure offer and use it. Then the next week I get another one ...why would I go back and pay full price when there is another Groupon giving me 50% off?

I use Groupon too, quite a bit.

If you are a merchant that is offering a product, then you can lose your ass with groupon. They charge 40-50% of the sale and want you to discount 50% or more from Retail price.

However, if you are providing a service and can up sell, the amount of customers you can gain is phenomenal. It is not a business model for everyone but it really does work if managed correctly.

Also, if you can get a product in groupon goods, there are huge profit potentials. I have worked with lots of the other deal sites selling my small electronics, and no way do they generate the volume of sales Groupon does

The thing I've noticed about the goods is that they aren't all that great of deals too. People just expect and think they are because they are from Groupon. I remember I bought these Skytex mini tablet type things for $60 last year for my kids. (They already ruined two iTouches, so I just wanted something for movies) and after I bought them I checked on Amazon and it wasn't really any cheaper.

I don't care what business you are in... if anyone offers you 6 Billion in cash, you sell. There are very few things anyone owns that are better than 6 Billion in cash. They turned away financial security for every future generation of their genetic lineage... for ownership of a coupon company?

Sly,

This is one billion dollars (every bill in the stack is a $100.00 bill)
http://infosthetics.com/archives/one...on_dollars.jpg

They turned down SIX of these for a coupon business that is near worthless :1orglaugh

I know what you are saying but wouldn't Zuck have been foolish to take the 10 billion he was offered several years ago?

Yes, but now they have an endless supply of coupon loving MILF's for life!

No.

He would have had 10 billion dollars. Zero responsibilities and could do whatever he wanted with the rest of his life. I am all for 'earning more' but at a certain point that loses any meaning. The difference in your life between having 6B and having 10B is zero. :2 cents:

I am fairly certain you'd need only a tiny fraction of the 6B to get access to that same MILF supply. :winkwink:

You are saying it shouldn't be all about the money, while chastising them for not taking an easy payout. Perhaps they didn't take the payout because they wanted to build something bigger/more?

Either way, it's not like these guys are short on payday. They could have had their $6 billion, sure, but maybe it's not about the money to them. Some people just like to build. Could they have built something new? Sure, but that's not really the point. They had their baby, they stuck with it.

Talk to a programmer that builds a powerful system from the ground up. That system is their life.

You know you're a true baller when you need a FORKLIFT to move some of your "walking around money".

I guess it depends on what you think the cap is...
From my POV, 6B is 'unlimited money' and no amount is 'more' than unlimited. That's full generational wealth that would take decades to spend if you mismanage it or could last to the end of time if properly handled. So when someone offers that amount for pretty much any business or product... I'd say yes. Even if the long term value of the asset were 10B or 20B.... I'd take the 6B, wish them well, and hope they make more than they paid me. Once I have my 6B no reason to be greedy... :winkwink:

Gimme 6 billion dollars and a comfortable couch with a big TV. I can stay busy in my own time doing charity and whatnot.

Greedy bastard.
If we give you 6B you can PAY for your TV and couch out of that windfall. :1orglaugh

Likely they are set for life anyway... does it really matter if they have 100M, 1B or 10B? probably not... they probably reached a point where it doesn't matter any more, and are doing it just for the fun of it... :2 cents:

QFT!

That's all that needed to be said. Thread CLOSED! :thumbsup:)

Maybe that's the reason he doesn't sell. Maybe he already has enough $ to cover his magic #. I'm sure he likes what he's doing.

Merchants lose hard for that kind of exposure. The only ones I see breaking even are hotels from bar, food and parking sales. The last one I got was for a haircut at a super high end trendy place in Santa Monica. $65.00 / $250.00 deal. Best haircut ever... Won't be back at $250 a pop lol

Yep, in the consumers eye you have set the real value of your product and make then feel ripped off if purchasing at normal, read profitable, price levels.

Just curious.. what was myspace worth at the top, was he/they offered any real money for it? What is it worth now?

I know in the US it is pretty much dead, not sure about other countries tho

You can do that without even having a job, I'm sure that's what most jobless people do.

:1orglaugh:1orglaugh

it's usually true

This. If you already are set for life you may choose to build something "meaningful" rather than get more money that won't change your lifestyle.

Of course that said - they still should have taken that deal, they could make more meaningful things with 6B..

While I know it depends on the city you live in, any groupon or similar coupon type company I used gave me shit. Almost all the companies I went to offered a terrible product/service so no, I'd never go back to them. But like Kristin said, she gets her mani/pedi & then the next week she gets another one from a different company. Why pay more?

In the grand scheme of things this probably hurt consumerism big time.

While I'm all for coupons & saving money, consumers now rule the roust & are sometimes assholes to companies DEMANDING low prices or they will go elsewhere. It was bad before, but it's probably way worse now after Groupon.

As an entrepreneur, I've never wanted to get into retail as it's just too much work, but I sympathize with them now b/c as someone wrote in their e-mail blast the other day, most people (especially the younger generation) go into a store to look at whatever they want to buy, they settle on what they like, then go back home, buy it ONLINE, get free shipping, & that retail store just wasted their time servicing the potential customer who never had any intentions of buying from them in the first place.

As for whether they should have taken Google's offer, while I understand it's his baby & I get what he's feeling, if he can't figure out that he needs to sell b/c his stock is dying, then he probably doesn't deserve the money.

He's a nice guy from what I saw on 60 minutes, but really, as I learned from a millionaire once, your ENTIRE purpose when starting a biz should be to eventually sell it. If you don't have that in mind when starting the biz, you really aren't a true entrepreneur.

As much as I resisted that idea when I heard it as I happen to fall in love with my bizes, he's probably right.


Michelle
P.S. But then again, maybe he just can't stand Google like I can't. LOL

your ENTIRE purpose when starting a biz should be to eventually sell it. If you don't have that in mind when starting the biz, you really aren't a true entrepreneur.

great line!

I live in a rural area, so I can't imagine there is anything there that would apply to me. That may be a false premise, but I never checked it out on account of that.

There are some things in life that I can think of that you might want to hold on to and ignore sale offers. But as trendy as most internet things are, I would be hard pressed to think of a site that should not sell if they are offered 6 billion dollars.

Amazon is the only one that comes to mind.

A lot of businesses here have gone bankrupt after doing a Groupon offer. Those that didn't, you don't see ever trying it again.

The only thing I can see it being 'good' for is: if you know you are going out of business anyway, you can get a lot of cash up front and then lock the doors.

I think a lot of folks like me were intrigued at first, realized that the deals were either forgettable or never what they seemed, so we stopped buying them.

personally, i don't trust deals with such a huge discount. car cleaning for 50 bucks, was 100..yeah they are gonna do a shitty job most likely.

The one advantage of Groupon is exposure. If you have something nobody else has or if you have something that is already affordable and need to get exposure it definitely can pay off. A new restaurant that needs people to come try the food and things of that sort can profit. Nobody will pay $50 for a discount haircut and come back at $250 next week... but a new restaurant selling meals at $40 a plate offering 2 for 1 or whatever to get noticed can increase sales dramatically. A friend of mine has made good money doing this with a 'kids party place' business that was new and needed to develop a customer base.

That being said... at 6 Billion offered... you sell. ;)

You have to remember that if you own a restaurant your goal should be good customers. The kind of customers that groupon attracts are the same kind that will stiff the waitress or complain about their food and then demand money back. I own a retail business and I noticed as I got busier and raised my prices the quality of my clients got better.

Groupon customers are the equivalent of the affiliate that sends 10 hits a day and wants to tie up your service reps with a laundry lists of requests because they think their traffic is gold and you should kiss their ass for it.