18 Months Ago GroupOn Did Not Exist

Groupon logo.Image via Wikipedia
Reuters: Grouponomics: 18 months ago, Groupon didn’t exist. Today, it has over 70 million users in 500-odd different markets, is making more than a billion dollars a year, has dozens if not hundreds of copycat rivals, and is said to be worth as much as $25 billion. What’s going on here? There’s obviously something clever and innovative behind Groupon — but what is it? ...... “Groupon doesn’t do anything that four of us with a phone couldn’t do” ...... the more people Groupon signs up, the more targeted its deals can be ...... the idea that coupons only become activated once a certain minimum number of people have signed up for them. This is essentially a guarantee for the merchant that the needle will be moved, that their effort won’t be wasted. With traditional advertising or even with old-fashioned coupons, a merchant never has any guarantee that they will be noticed or make any difference. But with a Groupon, you know that hundreds of people will be so enticed by your offer that they’re willing to pay real money to access it. That kind of guaranteed engagement is hugely valuable, and more or less unprecedented in the world of marketing and advertising. ....... one sector, which I think is Groupon’s biggest: restaurants. ....... Before Groupon came along, there was no effective way for merchants to reach consumers in their area, while excluding everybody else. If you’re a neighborhood restaurant, you don’t want to entice people who live miles away: you want to reach locals. And while Groupon isn’t quite there yet — especially in New York, where a restaurant more than a few blocks away can feel like a schlep — it’s orders of magnitude better at targeting than anything which came before it. And it’s improving every day. ........ one of life’s great mysteries is why the New York Times is spending tens of millions of dollars building and promoting its easily-circumventable paywall, when it could have built a first-rate Groupon clone instead. The NYT has the exact home addresses — and the associated email addresses — of hundreds of thousands of well-heeled newspaper subscribers in a rich city of tiny neighborhoods. It also has a sales force which talks to local businesses regularly. It should own this space in New York City, instead of ceding it to arrivistes from Chicago who have much less specificity as to where exactly their subscribers live ........ when a few hundred people have signed up for your deal, you get a huge amount of mindshare from them. Many will redeem the Groupon very quickly, but a lot of them will wait a while, thinking about you in the back of their minds all the time ....... Groupons provide an important nudge to jolt people out of their day-to-day habits and try something new ....... By forcing people to pay for their Groupon, restaurants lock in new customers in a way that old-fashioned coupons never could. ....... a Groupon is a commitment device ...... very good at driving traffic during slow periods ...... he timed its Groupon “to create a surge of business in an otherwise soft couple of months after the holidays.” ....... 66% of merchants offering a Groupon said that the offer was profitable for them in and of itself — not including any subsequent repeat business from new customers. ....... diners spending their Groupon at a restaurant averaged a check 80% greater than the face value of the Groupon itself. ...... if that Groupon helps you to discover a new neighborhood gem where you go on to become a regular, then that’s a genuine and highly valuable service that it has performed, no matter how much money you spend on your first visit. ....... social media is at heart a fantastic way for companies to compete on quality rather than marketing glitz. ........ the best way to get great word-of-mouth is to deliver fantastic service. For a small company or even a large company which is great at what it does and never does any marketing per se, social media is a godsend. ........ Groupon’s CEO, Andrew Mason, attributes his company’s success not to the genius of the idea itself, but rather to Groupon’s ability to execute — to keep both consumers and merchants happy. ...... more than 95% of merchants would run their deal again or recommend Groupon to a fellow merchant. ...... enormous amounts of effort into ongoing customer service, rather than just putting four sales guys in a room with a telephone and putting them on commission. ...... Groupon itself, as much as its merchants, is counting on repeat business. And that comes from having a positive reputation which can spread like wildfire over Facebook and other social networks.

GroupOn fascinates me as a company because it uses simple technology, and has this clear offline component. It has boots on the ground. And it is the fastest growing company in history. That offline component part really, really gets me.

There are lessons my microfinance startup can learn. It is to be first and foremost a High Touch company. The offline part is fundamental.

Chris Dixon Kind Of Person
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The Google Corporate Culture

Saying there are no barriers to entry to the GroupOn business model is like saying Google Search's competition in but a click away.

GroupOn is where the tire hits the road. For me computers were not interesting before the internet came along. I only ever used Word because that was the official requirement. Otherwise all my early documents were composed in HTML, so I could easily share.

For me the Internet has always been about people. And the best way to interact with people is offine, in person, face to face. And GroupOn takes people offline. I like that. Their proof is in the pudding. They got the numbers to show.

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