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Groupon has no viable business model

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Re: Groupon has no viable business model

#121

Post by pbreit »

pbreit wrote: post #115
jellicle wrote: post #75

Earlier quoted context omitted.

I'm pleased for success which is built on providing real value to real people. I'm not pleased at, say, Bernie Madoff's success. (Over 15 highly successful years in business, and only one unsuccessful one!) IMHO, he wasn't providing real value to people and his apparent success was only due to fraudulent accounting. According to Wikipedia, Madoff's brother invested $32,000 and received profits of $16 million - an imp…

Comparing Groupon to Madoff is a bit of a stretch.

Why the down vote?

Re: Groupon has no viable business model

#122

Post by pbreit »

mgkimsal wrote: post #119
pbreit wrote: post #114

Earlier quoted context omitted.

25 cents to get someone through the door is the best deal on the planet.

It really depends on who that 'someone' is. A tire-kicker who has no intention of ever becoming a customer in the future, and just wants their 'deal' - no one wants those customers. Groupon doesn't seem to offer any way to segment or market your message/deal to subsets of people differentiated on any other signal besides those customers that "want a deal".

At $0.25 per, it really does not matter. Even at higher costs, the customer mix would need to be pretty horrible to compete unfavorably with traditional advertising where you very well might get zero custo,ers for your outlay.

Re: Groupon has no viable business model

#123

Post by mgkimsal »

pbreit wrote: post #122
mgkimsal wrote: post #119

Earlier quoted context omitted.

It really depends on who that 'someone' is. A tire-kicker who has no intention of ever becoming a customer in the future, and just wants their 'deal' - no one wants those customers. Groupon doesn't seem to offer any way to segment or market your message/deal to subsets of people differentiated on any other signal besides those customers that "want a deal".

At $0.25 per, it really does not matter. Even at higher costs, the customer mix would need to be pretty horrible to compete unfavorably with traditional advertising where you very well might get zero custo,ers for your outlay.

In the example given, it's really $1.25, but even at $0.25, I'd still disagree. That's just the cost of getting someone in the door. If your sales process is just people browsing in a physical location, possibly that's OK. If it requires a lot of interaction with staff, that's cost that needs to be factored in.

Should that be factored in to the groupon price? Absolutely. Will most people know to do that (and goes groupon counsel people on how to do that)? Based on most groupon horror stories, absolutely not.

Re: Groupon has no viable business model

#124

Post by phereford »

pbreit wrote: post #114
phereford wrote: post #96

Earlier quoted context omitted.

It is 100% dependant on industry. Ask any retailer if a Groupon makes sense when they depend on the margins their products produce. The only way it makes sense is if they are able to get large volume discounts on whatever they are trying to sell. Just running some #s here. Local clothing ship buys jewelry for $5/piece and marks it up to $15. Groupon takes 75% of the $15. Groupon takes $11.25 out of the $15 and you ju…

25 cents to get someone through the door is the best deal on the planet.

25 cents on top of 50 cents.

You have to take into consideration the discount they are required to give as well.

Re: Groupon has no viable business model

#125

Post by phereford »

mgkimsal wrote: post #123
pbreit wrote: post #122

Earlier quoted context omitted.

At $0.25 per, it really does not matter. Even at higher costs, the customer mix would need to be pretty horrible to compete unfavorably with traditional advertising where you very well might get zero custo,ers for your outlay.

In the example given, it's really $1.25, but even at $0.25, I'd still disagree. That's just the cost of getting someone in the door. If your sales process is just people browsing in a physical location, possibly that's OK. If it requires a lot of interaction with staff, that's cost that needs to be factored in. Should that be factored in to the groupon price? Absolutely. Will most people know to do that (and goes gro…

Those horror stories are actually somewhat scary for a business owner. Not being able to dictate what time your discount starts?

If people have a bad experience with the Groupon at your store, the store gets inflicted with tons of bad reviews due to long lines, long checkout times, etc etc etc. While in theory this sounds like a good problem to have, its not and won't provide a sustainable stream of customers (i.e. majority of these customers come once, have an awful experience because of the aforementioned problems and never come back).

While my sample size is small (~15 biz owners) I saw it first hand at a restaurant in Somerville. My buddies and I stayed for 3 table turns around us. I overheard everyone that was there because of Groupon and every single table had no intention of coming back. They didn't mention the cause, but I am assuming it was slow service because the place had a 1.5 hr wait (normally 15mins).

Re: Groupon has no viable business model

#126

Post by phereford »

coffeemug wrote: post #57

It's almost as if people derive personal satisfaction from poking holes in Groupon's success (or any startup, for that matter). Groupon has no viable business model, people will get tired of Zynga's games, Twitter can't monetize, Facebook will be killed by Google+/is useless/the ads on it aren't worth anything, etc. Every time one of these things gets pointed out, people show up and start high-fiving each other, say…

Let's remove the emotional out of the equation (jealousy, envy, etc).

Groupon has had success (I won't say massive b/c I can't quantify massive). The reason people are poking holes in their business viability is strictly due to their recent SEC filings for an upcoming IPO. Companies that do well on the stock exchange are those that are able to show profitability. Do some business on the exchange miss on earnings/profit margins? 100%. It is probably a 50/50 coin flip on whether or not a company is going to hit their earnings reports.

Why people are "attacking" Groupon is because of their somewhat odd use of CSOI (which is vastly different from adjusted CSOI).

To run a business that is publicly traded, you have to show that costs are in order so that you can reach probability. Groupon has had somewhat exploding costs to grow quicker than their competitors (fine by me). But using history as an indicator of profitability in the future is what has everyone in a tizzy about Groupon's business viability.

Re: Groupon has no viable business model

#127

Post by orijing »

coenhyde wrote: post #36

The viable business model for Groupon is to shed 90% of it's 7500 employees, improve business satisfaction and let the businesses come to them. This may be hard now that Groupon has such a bad reputation amongst businesses. Groupon was too enthusiastic to become big rather than good. I understand why they thought it was necessary and to some degree I agree that it was the correct game to play but I think they have de…

This is exactly the approach Google and Facebook are taking. Let time tell who is the winner

Re: Groupon has no viable business model

#128

Post by Rariel »

phereford wrote: post #95
Rariel wrote: post #37

Earlier quoted context omitted.

If you don't mind me asking, who do you work for and what makes the deal site sustainable for local businesses?

Sustainable means it doesn't hinder the business like a 50% off coupon and a 25% split on the revenue thereafter. Most local businesses cant afford that and realize it too late. The company I work for is thegolocalcard.com (won't plug it again on Hacker News...I promise).

How funny! I love golocal in Austin! You guys rock, really great company and concept. I like to use mine at Quacks.

Re: Groupon has no viable business model

#129

Post by phereford »

Rariel wrote: post #128
phereford wrote: post #95

Earlier quoted context omitted.

Sustainable means it doesn't hinder the business like a 50% off coupon and a 25% split on the revenue thereafter. Most local businesses cant afford that and realize it too late. The company I work for is thegolocalcard.com (won't plug it again on Hacker News...I promise).

How funny! I love golocal in Austin! You guys rock, really great company and concept. I like to use mine at Quacks.

Haha! Money! I am developing an iPhone app for them and helping start GoLocal in Boston :).

The GoLocal Austin people are awesome and a half :)

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