When Groupon came out, I simply could not understand what the hype was about.
A random, untargeted mass group discount coupon spammed to me every day or week, with some discount which may or may not represent good value ?
Coupons and discounts had been around for years, but as is so often the case in business when the timing for a real explosion in take up is ripe the incumbent at that moment has the best chance of winning the day.
Whatever factors were relevant and converging at the time Groupon started it’s ascent (the discussion of which belongs elsewhere) they had reached critical mass and the Groupon team began hitting a home run.
As an entrepreneur, I should love Groupon. The thing is, it’s not a sexy business. Sending out coupons by email? If you’d asked me will it work back in 2008 I might have wrongly answered that the market was covered already (there’s a lesson there which people I’ve worked with recently have yet to learn!).
Financially though it is quite a sexy business, assuming you ignore the complaints of 50%+ of its business customers (more complaints here) and ignore the naysayers that claim Groupon has a vacuous model and point out that it is losing a lot of money. Yet more negative analysis from Techcrunch about Groupon here. That is a lot to ignore…
Launched in November 2008, they executed a classic city by city roll out starting in Chicago, followed by New York City, Boston and Toronto off the back of $1 million seed funding (only in the US would £700,000 be described as “seed” funding).
As a customer, the reason I’ve not liked Groupon is that it’s dumb.
I don’t want to feel like one of 10,000 mass consumers and most of the deals I am sent don’t appeal to me. They waste my time. Groupon should know what I like, not send me crap I don’t want; but there are enough users out there who the service DOES appeal to: 40 million plus users by most counts.
In under a year of Groupons launch copycat sites appeared like wildfire; within a mere 20 months we had another mulit-zillion dollar company being courted by the Googles and sighted as another start-up mega success. May 2010 Groupon bought European service MyCityDeal, helping secure their position as dominant player in the space.
Well their future isn’t going to be about emailing mass discount coupons ..and our relationship with Groupon as a customer is going to evolve and change…assuming the company doesn’t crash and burn post any future IPO.
But what IS their space?
My hunch about Groupons roadmap became clear when they purchased Pelago in April. Pelago had pivoted a couple of times with their consumer product Whrrl and although there were differences between Pelago and Rummble, I suspect (despite sitting on x20 as much funding as Rummble) they had struggled with some of the same early-to-market problems that I had at Rummble (a company the author founded in 2007. Trying to run a mobile-location based discovery tool for sharing your favourite experiences, with only a few smartphone handsets in circulation and pre-iPhone, was always going to be hard).
So what does the Pelago purchase mean? To my mind Groupons biggest current competitor is Foursquare and the leviathan of Facebook with its local deals.
Google seems to be struggling still to make an impact in the local social space, despite its’ dominance on the web with Adwords.
Groupon will grow into something which looks far more social and Foursquare-like than most people previously expected. The Pelago team bring a wealth of experience in how not to do this and will accelerate Groupon to something beyond a daily deals discount site. With a revenue stream and a base of 40 million users and growing fast, they have the reach and capital to evolve into a major platform. Foursquare is nudging 10 million.
The old school check-in review companies don’t want to be left in the shade either, with acquisitions like Qype buying Cooledeals, everyone is converging on the local deal space.
So Here’s The Beef
There’s a lesson here, which is that IF you can find the backers/investors with the long term vision and understanding (and that is hard to do) you can build a revenue generating company off the back of something boring in order to create something interesting – and wait for the market to mature in the process.
The big question is, was that the game plan all along? Did Andrew Mason have this vision from day one, or did it, like most companies, become clear on the journey. Mr Mason, feel free to complete the comments box below…
STOP PRESS: Foursquare announce a coupon sharing partnership; I guess the adage Keep Your Friends Close, Your Enemies Closer has not been lost on Dens. I wouldn’t be surprised if Groupon buys Foursquare, if he [Dens] ever agrees to sell.
..and more negative press on coupons and groupons: http://techcrunch.com/2011/06/11/google-offers-daily-deals-business-die/