27 March 2011

Should Have Taken The Cash Groupon!

I always try to let you know where I stand on a topic. So here is another one. While I think Groupon is fun - I don't see it as being anything different or ultimately sustainable over the long term. I listened to Groupon COO Rob Solomon at the PhocusWright Conference last year and struggled then to understand what the long term value proposition would be. After all Coupons have been around for a very long time.

Last week Andrew Mason announced to the world that Rob was moving back to God's Country (California). Here is the announcement from the WSJ All-Things-Digital including the email from Mr Mason.

I have a Groupon for Flying Lessons that needs to get used up, it was a Xmas present. Very nice idea. Good way to trial. But in my view that is a niche and it was sustainable only for a short period of time. And now there is more than anecdotal evidence that Groupon is beginning to fade. Indeed there is a lot of chatter deriding Groupon for not taking Google's $1billion. Though judging by the tortuous process that ITA has gone through - the ability to close that deal would be stuck in limbo too.

As reported in Webpronews - Yipit a deal aggregator site has shown that Groupon's revenue for the top 20 US metros has fallen for the second month in a row. With Living Social now in a dead heat with the Chicago based company.

Checking out Google Trends and Alexa - I cant see this trend yet. But I believe we are seeing the turning point of Groupon when its growth curve will max out. I have compared Groupon to 2nd Life in the past as a fad. I think we are seeing that fad peak. We will have coupons forever. They will come in a wide and ever evolving form and some of these will do a cycle and become important again while others decline.

I think that Groupon's model particularly hurts the smaller companies. There is more than a little evidence to support this but you dont need evidence from statistics to know that a 75% reduction in gross revenue for your product is not sustainable.

Thanks and goodnight...

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