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On Grouponzi

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Re: On Grouponzi

#11

Post by rkon »

The fact that there are so many clones isn't proof that Groupon's business model works, it's just proof that there are no barriers to entry. Compared to Google and Facebook, their mailing list isn't much to brag about either. If they had impressive churn rates, you can bet we'd be hearing all about it by now. The fact that they keep those numbers secret is highly suspect, in my opinion.

Also, paying hundreds of millions out to early investors is exactly what they should NOT be doing if they're trying to "get ahead" of their competition. If they had any faith in their own business model, they'd put it into the business and expect even higher returns.

Re: On Grouponzi

#12

Post by ericd »

rkon wrote: post #11

The fact that there are so many clones isn't proof that Groupon's business model works, it's just proof that there are no barriers to entry. Compared to Google and Facebook, their mailing list isn't much to brag about either. If they had impressive churn rates, you can bet we'd be hearing all about it by now. The fact that they keep those numbers secret is highly suspect, in my opinion. Also, paying hundreds of milli…

I agree with most of what you said, but it's not highly suspect to want to keep something as vital as churn rate secret from your competitors.

Re: On Grouponzi

#14

Post by SwellJoe »

sunchild wrote: post #2

Some thoughts on this: A. Spending on customer acquisition is building real barriers to entry. I tend to agree with DHH that the barriers to entry will never be high enough in the daily deal area. Also, as Groupon seeks to stay ahead of daily deal competitors, it cannibalizes its own business model – namely, the artificial scarcity and urgency of daily bargains reverts to more and more on-demand variety. We see this…

When it comes to daily deals, I doubt consumers will chose Groupon over a better deal, just because of the Groupon name.

On this count, it's worth remembering that extreme bargain hunters have very low loyalty to vendors. It's what allows them to take advantage of the best deals. Which is why I think a lot of businesses have been disappointed in the results from Groupon deals, and why the moat around Groupon is pretty shallow, given how much they've spent.

Re: On Grouponzi

#15

Post by billswift »

neilbaylor wrote: post #13

Google doesn't offer to buy Ponzi schemes for six billion dollars.

I suspect Google was looking at the possibility of modifying it to fit in with their advertising business. I can envision several ways that could have worked out.

Re: On Grouponzi

#16

Post by tptacek »

SwellJoe wrote: post #14
sunchild wrote: post #2

Some thoughts on this: A. Spending on customer acquisition is building real barriers to entry. I tend to agree with DHH that the barriers to entry will never be high enough in the daily deal area. Also, as Groupon seeks to stay ahead of daily deal competitors, it cannibalizes its own business model – namely, the artificial scarcity and urgency of daily bargains reverts to more and more on-demand variety. We see this…

When it comes to daily deals, I doubt consumers will chose Groupon over a better deal, just because of the Groupon name. On this count, it's worth remembering that extreme bargain hunters have very low loyalty to vendors. It's what allows them to take advantage of the best deals. Which is why I think a lot of businesses have been disappointed in the results from Groupon deals, and why the moat around Groupon is prett…

Eh. How much Groupon disappointment do you think comes instead from brick & mortar small businesses being utterly unacquainted with the high-volume low-conversion sales model of the web? Because that seems like the thesis behind Groupon: give local biz a taste of how customer acquisition is tuned and scaled on the web.

I'm a loyal customer of several well-known, well-regarded small businesses in Chicago, and none of them have the marketing savvy of the least-successful successful web startup we can think of.

So in that regard, I think the people who worry about the disloyal deal hunters miss the point a bit. That's the flip side of the 5-10% conversion rate: the 90% who bounce. Web people don't flip out about this. Local biz does.

Remember, the most popular current alternative to Groupon is advertising. The only reason local biz people don't flip out over advertising effectiveness is that nobody knows how to figure it out.

Re: On Grouponzi

#17

Post by tptacek »

billswift wrote: post #15
neilbaylor wrote: post #13

Google doesn't offer to buy Ponzi schemes for six billion dollars.

I suspect Google was looking at the possibility of modifying it to fit in with their advertising business. I can envision several ways that could have worked out.

That's a little weasely, because the people calling Groupon a Ponzi scheme tend to talk about how minimal their competitive advantage and technological "moat" is. Google can build stuff. Why'd they try to buy this?

Re: On Grouponzi

#18

Post by laurenkuhlman »

I don't see Groupon, or any of the clones as a good investment, for a very simple reason: there's no network effect. In the social realm, thats really the key. Social networks like LinkedIn, FaceBook and Twitter increase their value with each additional user. Telephones are also a classic example of the network effect. Groupon does not become more useful to me the more users it has. Possibly, it becomes more useful to merchants but from the merchant's I've discussed this with, other sites simply offer them better terms and, therefore, more profit.

Personally, I think sunchild had a great point by addressing that the artificial scarcity is gone. Myself, and my peers, have now reverted to buying these deals on-demand. If I want a massage deal, I head over to YipIt (an aggregator) and do a quick search. I don't waste my time reading their emails.

SwellJoe and GentleBen also addressed the same issue: lack of loyalty. My biggest complaint as a person on constant data overload is that Groupon (I use the Android app) now sends me over a dozen deals per day, half of them for suburban restaurants which I would never patronize. Its no better than coupon books or every other "deal" marketing ploy now.

Re: On Grouponzi

#19

Post by antiscam »

tptacek wrote: post #17
billswift wrote: post #15

Earlier quoted context omitted.

I suspect Google was looking at the possibility of modifying it to fit in with their advertising business. I can envision several ways that could have worked out.

That's a little weasely, because the people calling Groupon a Ponzi scheme tend to talk about how minimal their competitive advantage and technological "moat" is. Google can build stuff. Why'd they try to buy this?

It wouldn't be right to assume that because Google has many smart people, everything they do as a result is smart. Google is hardly an innovative company anymore. In fact, they seem mostly to be coasting on existing models and paying lots of people mostly just so that they don't work for existing and potential competitors.

Re: On Grouponzi

#20

Post by tptacek »

antiscam wrote: post #19
tptacek wrote: post #17

Earlier quoted context omitted.

That's a little weasely, because the people calling Groupon a Ponzi scheme tend to talk about how minimal their competitive advantage and technological "moat" is. Google can build stuff. Why'd they try to buy this?

It wouldn't be right to assume that because Google has many smart people, everything they do as a result is smart. Google is hardly an innovative company anymore. In fact, they seem mostly to be coasting on existing models and paying lots of people mostly just so that they don't work for existing and potential competitors.

I think this is a fallacy stemming from the fact that Google's initial products were so unbelievably successful and important that they are likely to be permanently hard to top. I do not agree with you that Google is no longer innovative, and I particularly disagree with the notion that they are so uninnovative that they'd believe they lack the technological prowess to compete with Groupon.
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