Groupon has a huge mailing list and a lot of demographic data. A company like Pepsi or Home Depot could pay $0.10 per e-mail to send a coupon out to 10 million people. That's $1m, and there are enough companies with that in their marketing budget to make it viable. What matters is whether or not Groupon realizes what they have.
The Fall of Groupon: Is the Daily-Deals Site Running Out of Cash?
71–77 of 77 posts
Re: The Fall of Groupon: Is the Daily-Deals Site Running Out of Cash?
#72Earlier quoted context omitted.
For how many years did Amazon lose money on every customer? Land grabs WORK. I'm not convinced that it will here, or that Groupon is a good investment at its current valuation... But the idea that a retail voucher business can't be self-sustaining seems kinda silly. Groupon has 42% gross margins in 2011 q1 ( UP 6% from the previous quarter).
For how many years did Amazon lose money on every customer? Fewer than most people think. Consider the financial model of a (successful) grocery store ostensibly losing a penny on each transaction. If you're clever, you can make plenty of money by arranging your contract terms carefully.
6 years is the answer to my rhetorical question, if you're curious. Groupon is less than halfway to that point, and has much higher gross margins than Amazon did at the time (and about 2x what Amazon has right now).
Re: The Fall of Groupon: Is the Daily-Deals Site Running Out of Cash?
#73Earlier quoted context omitted.
"I'd like to see you build a global local salesforce tomorrow." I don't need to build a global local salesforce for Groupon to be in serious trouble. Hundreds of people can build local salesforces in their own area, and the aggregate will cause Groupon trouble. It's a bit of a different criticism that what most people are making, but I'm not seeing a big advantage to Groupon centralizing vs. hundreds of fast-moving m…
Marketing has significant economies of scale, a nationwide marketing campaign tends to cost a lot less per customer acquired than a local one. It's very possible to own the national local market, good examples of this are Craigslist and (historical college-period) Facebook.
Most people badly misunderstand economies of scale. It doesn't mean that things just keep getting cheaper and cheaper and cheaper the bigger you get. Generally you get the most per thing benefit at the bottom, and as you scale up the gain levels off. A company may make 50 million things a year but not actually get any significant per thing savings over what they could get at 1 million things per year.
Sure, there are marketing economies of scale. But they don't scale indefinitely, and by the time you're advertising to a state or at most a region of this country, you've captured them all, or as close to all as makes no difference. I don't see a huge win for Groupon here.
Craigslist owns its market at this point solely because nobody will beat its price, and as for Facebook's permanent dominance (because that's the topic at hand, not a transient dominance, Groupon already has that but they won't be profitably unless they can continue that dominance for quite a while), call me again in three years, OK? Let's see where G+, Facebook, and probably at least one other competitor by then stand.
Re: The Fall of Groupon: Is the Daily-Deals Site Running Out of Cash?
#74Earlier quoted context omitted.
Marketing has significant economies of scale, a nationwide marketing campaign tends to cost a lot less per customer acquired than a local one. It's very possible to own the national local market, good examples of this are Craigslist and (historical college-period) Facebook.
Most people badly misunderstand economies of scale. It doesn't mean that things just keep getting cheaper and cheaper and cheaper the bigger you get. Generally you get the most per thing benefit at the bottom, and as you scale up the gain levels off. A company may make 50 million things a year but not actually get any significant per thing savings over what they could get at 1 million things per year. Sure, there are…
I disagree on both accounts, even in manufacturing scaling has it's limits. Being able to mass produce can't infinitely reduce costs, sooner of later you'll hit a barrier (cost of natural or human resource) which can't be reduced.
Secondly no-one has permanent dominance in anything, how many market leaders from 100 years ago are still leaders today ? - it's purely a case of how long you can hold dominance for.
Re: The Fall of Groupon: Is the Daily-Deals Site Running Out of Cash?
#75Earlier quoted context omitted.
Most people badly misunderstand economies of scale. It doesn't mean that things just keep getting cheaper and cheaper and cheaper the bigger you get. Generally you get the most per thing benefit at the bottom, and as you scale up the gain levels off. A company may make 50 million things a year but not actually get any significant per thing savings over what they could get at 1 million things per year. Sure, there are…
I disagree on both accounts, even in manufacturing scaling has it's limits. Being able to mass produce can't infinitely reduce costs, sooner of later you'll hit a barrier (cost of natural or human resource) which can't be reduced. Secondly no-one has permanent dominance in anything, how many market leaders from 100 years ago are still leaders today ? - it's purely a case of how long you can hold dominance for.
You disagree with both points, then reiterate them? Read moar, plz.
Re: The Fall of Groupon: Is the Daily-Deals Site Running Out of Cash?
#76Earlier quoted context omitted.
I disagree on both accounts, even in manufacturing scaling has it's limits. Being able to mass produce can't infinitely reduce costs, sooner of later you'll hit a barrier (cost of natural or human resource) which can't be reduced. Secondly no-one has permanent dominance in anything, how many market leaders from 100 years ago are still leaders today ? - it's purely a case of how long you can hold dominance for.
You disagree with both points, then reiterate them? Read moar, plz.
I misread your comment
Re: The Fall of Groupon: Is the Daily-Deals Site Running Out of Cash?
#77Well its a good thing $810M of their $946M round paid out the founders and early investors. Now no one but the late round VC's and the 5000 employees get stuck holding the bag if this thing implodes. This is the problem with those early payouts (I don't mind these in theory but this case was egregious). There's not a lot of incentive anymore for the people running the company to do anything but what they're currently…
Oh, it's way worse than the late round VC's and the 5000 employees. All those small businesses don't get their share of the groupons immediately. When it implodes, and I think it will, thousands of small businesses will have the unenviable decision of whether or not they honor groupons they weren't paid for.