I generally agree with Andrew's posts but I disagree solely with respect to Groupon. In fact there are tons of groupons, and as far as I can tell they're all going concerns with increasing revenues, email lists, and growing user bases. Here in Argentina, there are at least three others, not including the startup put together by four classmates...that was soon acquired by groupon becoming groupon.com.ar.
I spoke with the CEO of a company that aggregates a very large percentage of the daily deal sites. They have several hundred they currently follow. Two things which may be salient. First, the CEO claimed that the smaller deal sites were all desperate to be aggregated, as building their list has proven to be far more expensive than they expected. Second, the aggregator is seeing a 30% annual turnover in the deal site population. That is, approximately 1/3rd of deal sites go under annually and are replaced by a like number of newly launched companies.
I interpret this as evidence that the lion's share of the market is likely to go to a few large players like Groupon, Living Social, Facebook, etc. It's been 2.5 years since Groupon launched. If smaller players were going to successfully carve up this market, wouldn't we see signs of that happening by now?
i saw that but my point is they are operating here - they're one of the largest online ad buyers - but so are a few others all of which seem to be acquiring customers. it will be interesting to see if the other reply is onto something that looks are deceiving and we'll see heavy turnover.
I think this is incorrect. Before Groupon was Groupon, they were The Point. A company that applied the same social tipping-point approach to consumer and political organizing. Think "if 2,000 people all agree, we'll donate $10 each to the WWF." Or march on city hall. This was powered by a RoR app that Ken Pelletier and a small team built. I'm fairly certain that the early tests of Groupon leveraged this app. If so, the early version of Groupon was powered by tech far more substantial and purpose-built than Wordpress.
Interesting. Although I understand this to mean that Wordpress hosted some of the deal copy. The group buying logic would have been served up by those embedded widgets talking to The Point's server logic. My understanding is still: early Groupon = hacked together front end (Wordpress I guess) + slightly modified group buying system from The Point + hacked together fulfillment system. But I'm not 100% certain I'm right about this. It's based on old bar conversations with a few early Grouponers, and given the quality and quantity of beer consumed I could certainly be misremembering.
I saw the earliest Groupon deals. I am almost 100% positive they consisted of a Wordpress install as the base with an embedded js/flash box powered by The Point tech that had all the deal stuff in it.
So yes, they did use WP. And yes, they did use The Point. I figure they created a Point project that happened to be a group coupon, and then embedded the widget on a wordpress blog.
I think for you, "starting a groupon" just implies the tech- the post acknowledges the trivial technical hurdle and argues that the real obstacle is the $30 per email sub. It's not real until you are actually making money on deals, and the cost per email is the real bottleneck.
Here in Uruguay we have lots of Groupon clones, in addition to Groupon itself. Two of them are at least as successful as Groupon right now (local WooW http://www.woow.com.uy/ and Argentinean NoTeLaPierdas http://www.notelapierdas.com/ ).
I guess one of the easy points for them was that acquiring users wasn't that expensive (not sure how they did it, but 90% of the Internet users have one of two Uruguayan email providers, and getting the email databases wasn't that expensive last time I heard about it). They also use Facebook (By the way, I read here that Facebook ads weren't having good conversion rates, but both me and my girlfriend have made purchases based on Facebook ads. By comparison, I never bought anything off a Google ad, surprisingly).
I don't get the part about arbitrage of local ad inventory that's no longer available. Is he saying it's no longer available because all the Groupon competitors buying up the inventory?
Yep. I've seen it in some other industries as well, particularly with auction markets like AdWords. One company will figure out a novel PPC strategy that pays out considerably more in profit than than it costs to acquire a customer. If this strategy also scales, it's a license to print money for a time. Problem is, competitors notice and mimic the same strategy, bidding up the price of the ad units in question (keywords, what have you) until it cost of acquisition is very close to the lifetime value of the acquired customer. It's not so much that the competition buys up all the inventory (although that happens if you don't pay attention) but that the price of the good inventory soars for everyone. So more value gets captured by the publisher of the ad units and less by the buyer.
Correct, it's not that 'anyone can start a groupon'. But it's rather 'any website/app with a large enough reach in at least one or more local market can start a groupon service'.
- yelp/gowalla/foursquare/scvngr/etc.
- facebook/google/apple/microsoft/etc.
- country-specific like rakuten/renren/yandex.
- local-specific like eatla/sfgate/latimes.
Literally hundreds and thousands of well-established websites can do coupons. They just have to look up which stores already have done a group-buying deal before and contact them. And they can all undercut each other until probably they only take 2-3% and give the rest back to vendors.
Even though theoretically what you are saying is correct. In reality however the tremendous investment group on has done in the building up the sales power provides them with more defensibility than you would think.
For example - A vendor is parting away with some money for every new customers. She could have used the same money via adwords? Still lot of these merchants may not have even tried adwords before. There in comes the power of having reach to direct markets.
Of course sales power doesnot provide as good protection against competition as technology or even UX, but that does not mean we can write off Group on that easily as well.
