Groupon has such a simple concept yet so appealing to all of us! Everybody loves discounts and now we can get them online. It really appears to be a win-win situation for everyone. The business only pays for the advertising if they get the business, the customer gets a discount, and Groupon gets a cut if the customer actually goes to the business. Of course, it isn’t that simple and there are a few drawbacks. First, you can’t just download all the coupons at once because they only offer one special per day (a big disadvantage in my opinion) so you have to visit the webpage daily and ideally share it with your friends. Also, in some cases it may be the case that marketers could actually losing money while advertising with Groupon at a very large level, although they might purposefully be doing it to gain awareness. Sam Diaz, editor at ZDNet recently posted a blog comment about how Gap in Chicago most likely lost money in a recent promotional push through Groupon.
Another major drawback (this time for Groupon) is that the concept is extremely easy to copy. Sites like LivingSocial(LS) are rapidly growing and although much smaller in revenue, last August LS got more web traffic than Groupon according to Comscore. Even though Groupon’s concept is easy to copy they have a major advantage that lessens this issue, which is top of mind brand awareness. Since I started thinking about writing this post, I have asked a lot of people where is the best place to find coupons online, and except for one person, they all said Groupon. Then I remembered that the one person who didn’t say Groupon doesn’t live in the US. He mentioned couponidad.com, the Colombian copy of Groupon.
The future of Groupon may seem uncertain to those who think that because the concept is so simple, it can easily be replaced by competitors. Although possible, I think that as long as Groupon keeps innovating and continues to be in the forefront of technology in what it relates to online coupons, they will continue to have the competitive advantage of having entered the market first. Google seems to believe the future of Groupon is promising as they recently offered to buy the company for $5.3 billion (the largest offer by Google ever). It also seems that Groupon think it is worth more and might be thinking of going public according to yesterday’s WSJ article. Only time will tell…
Groupon is a great tool to do marketing. As you comment about the ease to copy this business model, this is a big potential inconvenient. If competitors keep on growing (something Groupon couldn't and still can't control), what will happen is not only that they loose clients (companies, since the market is spread and therefore don't complete volumes) but also that this business model becomes not attractive anymore.
ReplyDeleteMaybe, since this is the fastest-growing business ever, maybe this industry would be the most competitor-aggresive one, and marketing "wars" will arise. I still don't know if this predictions would benefit or not final clients.
Still for maybe a long time Groupon has a great advantage over others, but would they be able to control comeptitors? Until now the only certainty we have is that currently there is no effective protection for that.
I agree with you vero. The fact that Groupon has achieved top of mind brand awareness is by having first mover advantage to this sector. The company has grown almost 890% in one year, an astonishing figure but we have to ask ourselves, is this sustainable? The threat of new entrants of this industry should be a consideration taken by Groupon's management before their IPO in regards of the sustainability of the business. Thinking as an entrepreneur, I believe Groupon should have taken the $5.3 billion offer by Google and run away! This industry will attract many competitors, and if Groupon's ability to maintain innovation fades away, the company would be compromised.
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