Groupon - The New Gordon Gekko

I personally don't like Groupon as a business. I am only lukewarm to its personal value to myself and to my family and friends.

The model though really bugs me. It just feels - well plain wrong. Carving up someone else's business model and profiting from it.

I dont buy the whole - new business pitch. That is all BS.

Groupon has burned through and incredible amount of cash in a very short period of time. It has raised $1.1 billion and burned through $942 million.

Henry Bodget has a post on them pointing out that Groupon is running low on cash. This is VERY scary. The business is built on the standard model of growth at all costs. Therefore it should be a Wall Street Darling.

BUT note what it did with the cash. Here is what Henry had to say:
"it is also worth noting that, in the history of the company, Groupon has raised a total of $1.1 billion of cash--and paid out $942 million of that cash to its early investors and executives (highly unusual for such a young company). If Groupon does get into cash trouble, therefore, it will not be because the company didn't discover an amazing new business opportunity or raise all the capital it needed. It will be because of, well, greed."

Read more: http://www.businessinsider.com/groupon-low-on-cash-2011-8?op=1#ixzz1Va99ymW1

Greed is good. Screwing your customers is better.

I really have a problem with this.

Cheers

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...

A Groupon Christmas

Well I had a Groupon Christmas courtesy of my family. Many different items we received were actually Groupon deals.

I wont say we are a thrifty lot but we definitely look out for a bargain. And these were all pretty good deals.

Over the past few months I have been asking merchants and users what their experiences have been with Groupon.

The general impression I get is that for the merchant it has become a necessary evil. One common concern I hear - and this is anecdotal from non-instant purchase things such as Restaurants is that it has moved the purchase process to a later date closer to the product delivery time.

In Europe in the 1980s the purchase of travel moved from an orderly process to a last minute model. One the suppliers and intermediaries have been trying to move away from ever since. Clearly unsuccessfully.

I think that we should pay close attention to the long term impact on pricing power by the supplier and conventional buying behaviour.

Be careful what you wish for... it may come true.

Cheers

Are Microsoft and Yahoo Still Relevant?

Yahoo has had its share of troubles lately and is still struggling from a degree of missteps combined with neglect and a smattering of hubris.

So let's consider things in context. Let's just look at email. With Facebook entering the fray - Yahoo still has more subscribers than the other two closes competitors (Gmail and Hotmail) combined.

But Yahoo is struggling to redefine itself in a world where search is dominated by Google and where the portal concept is slowly dying. People want more than just a gateway to content. They want to get there faster with less clicks. And Yahoo just doesn't hack it. The Social web is just so big that just by concentrating on it - as Facebook has - that the value can be mined. So Yahoo can be ignored by those who matter - the users and the advertisers.

Microsoft's value is harder to ignore. It owns several platforms not least of which is XBox. But the de-emphasis on the brand Microsoft has made the uber-brand less relevant. Of course it still carries its relevance in the corporate arena but even here it is under attack. The upsurge in Bing has clearly allowed them to stay in the game. But its a hard fought battle. But look at the brand cemetery from Redmond. MSN is probably about as relevant as Yahoo.

It is of course easy to go for the media darlings - Google and Facebook at the top end, with strong showings from Apple (iEverything) Groupon and Twitter. The long term winners must continue to make their brands and value proposition relevant. For this you have to be relentless at making your brand topical.

Good luck with that!