8 ms·

Why root for Groupon?

93 points by coloneltcb 11y ago

nirmel 11y ago
Groupon, and Andrew, really did solve something hard: local customer acquisition and attribution. Others who had been toiling away at this problem for years were stupefied. Really? That's the most valuable local commerce company (as Andrew notes)? But when those looked in the mirror they couldn't say they were guaranteeing customers with no risk. That's a powerful value proposition to the small local business.
- wavefunction 11y ago
  I believe they were capable of generating an increase in customers but I think the incremental customer base rarely converted into repeat business or very loyal customers, since the sorts of people who are looking to take advantage of "too-good-to-be-true" customers are not the sort of people who necessarily express consumer loyalty. They're looking to take advantage of whatever deals (consumer advantage) are available and so the value-proposition offered by a Groupon campaign was way-overvalued by both Groupon and the businesses who bought into it.
  - sbuttgereit 11y ago
    I do think there are those customers that are just looking for rock-bottom deals as you suggest, but I think the problem is more one of presence of mind than necessarily for the deep-discount shopping only crowd. For example, if you see a single ad, you don't remember the business... you need multiple impressions for it to start to stick. I think the same can hold true for new potential customers: the first visit may be positive, but in a couple or so weeks, it's not necessarily the first place they'll think of the next time they have need of the product. Groupon (and others like it) represent should be one small part of a larger marketing initiative. It can give you the opportunity to get in front of customers you wouldn't otherwise get in your store/buy your service/etc. But capitalizing on that first impression is where many small business fail. With a clever bit of follow-on marketing, I think you can get it to pay off. For example, for those that come in with the Groupon, offer another coupon for the next visit... don't make the deal so sweet perhaps, or make it a bring-your-friends sort of deal (2 for 1, etc). You train them to come back and think of you while at the same time train them to start accepting your regular pricing. Naturally this depends on your business... if it's wedding photography, you probably don't go down the Groupon type path to begin with. But if it's say, a dining establishment... this sort of thing could work. Of course. Many small business owners are simply not good business people when it gets right down to it. The small bookseller who loves and knows literature inside and out may not know how to market that business, find opportunities and niches, nor appreciate the financial pros/cons of any given decision. I think that's the biggest issue of all. They're the types likely to sign up for Groupon a get the initial visit, but never capitalize on that.
    - wavefunction 11y ago
      I agree, that's what I meant by "overvaluing" the proposition offered by GroupOn. I think they were great as an introduction or reinforcement to existing customers but the value of the deals demanded to run a promotion was too high. A staged proposition as you have outlined seems far more prudent.
- pbreit 11y ago
  Yep, as a local small business owner (pet boutique) I can assure you that the hardest part, by far, is getting customers into the store. Groupon is/was definitely the best service we ever found to do this. And it's pretty incredible that you only have to pay when people actually come in AND buy! I never felt very sorry for businesses who complained about the economics (even though they were bad, they were pretty straightforward). And I certainly didn't feel ANY sorrow for the businesses who "sold too much". I don't know if Groupon would have been such a hit with different discount structures. The "half off, a quarter to Groupon" was compelling to customers and easy to understand. I'm trying to envision "1/3 off and 10% to Groupon" or whatever.
  - justincormack 11y ago
    Why does the customer have to know how much Groupon is getting?
    - pbreit 11y ago
      Doesn't.
crabasa 11y ago
"I often find myself wishing that the original deal-a-day version of Groupon was around today; looking at the other paid options available to me as a small local business owner, I can’t imagine a lower risk, more cost effective, or higher impact way than having Groupon send a one-time offer to 500k people in the Bay Area about Detour, with a few thousand of them buying it for half off." Daily deals cannot scale and Andrew knows this better than anyone. When you're small you can price daily deals in a way that works for SMBs and your bottom line. But when you're huge, you only have 365 deals per year and the price you need to charge is out of reach for small businesses. You have effectively equaled the reach of a traditional media company.
- jacquesm 11y ago
  Daily local deals?
  - crabasa 11y ago
    Yes, daily local deals. Mason was wishing for some version of Groupon that would affordably deliver 500k emails to people in SF for his local business Detour. Such a thing does not and cannot exist.
    - jon-wood 11y ago
      Sure it can. It may not be a startup with a billion dollar valuation, but not every company has to be. You could probably make a pretty good living off something like that, especially if you can scale it to several local areas.
      - notahacker 11y ago
        500k signups in an area is a lot to ask for, especially if your daily deal email doesn't have an interesting range of products like all the other daily deal emails...
- rahimnathwani 11y ago
  Using Detour as an example of a local business is disingenuous. Detour's marginal cost per customer/tour is ~zero. The businesses that Groupon targets are mostly those delivering a physical good/service, like food or a massage. Those require materials and/or human effort, which are more expensive than bandwidth and electricity.
godzillabrennus 11y ago
I root for Groupon because I'm in Chicago and it's great for a company of that size to have originated here. Andrew has a great reputation in the area but Eric and Lightbank are almost universally detested which is a shame. I hope the company turns around and more importantly I hope Eric and Lightbank revisit how they treat entrepreneurs.
- deleted 11y ago
  [deleted]
- alawrence 11y ago
  I didn't realize LightBank was looked down on. I'm also in Chicago and work for a Lightbank-funded startup. Have you heard from other local entrepreneurs about poor treatment from LightBank?
  - Lambent_Cactus 11y ago
    My Chicago company is not Lightbank-funded, but all I see in print is relentless small-town boosterism - what's a more reliable source for sounding out a firm's reputation?
  - godzillabrennus 11y ago
    Yes, the overall mentality of anyone I talk to is don't even approach Lightbank. Word on the street is they are terrible for entrepreneurs to work with. It doesn't help that Lightbank has seemingly had high turnover and my limited interactions with them in other matters have sent me mixed messages. Again, it's a shame. Brad Feld from Foundry replies to almost every email he gets. Chicago needs a guy like that.
jackgavigan 11y ago
I'm not sure that Groupon ever had - or ever will have - a viable business model. It raised enough money when it IPO'd to keep it solvent but that safety net appears to be on the verge of running out - http://jackgavigan.com/2015/11/04/is-groupon-on-a-glide-path-to-bankruptcy/ http://jackgavigan.com/2015/11/04/is-groupon-on-a-glide-path... I'd love to know whether Mason and Lefkofsky ever genuinely believed they had created a viable company or whether they knew they were riding an unsustainable growth hack.
- deleted 11y ago
  [deleted]
- hitekker 11y ago
  My money is on the later. I recall reading an article in which Groupon got extremely tight-lipped about the viability of its business model. Like someone asked a few questions about how sustainable it would be once it scaled and then the person representing Groupon basically went into siege mode and gave only short, resentful answers. Wish I bookmarked that one.
wpietri 11y ago
That's just sad. Cognitive dissonance is a powerful thing. I can get why he wants to look in the mirror and say, "No, I really did do something worthwhile. Really, really!" And it's great that his wife is trying to buck him up. But trying to convince the rest of the world? Via rambling, need-an-editor Medium posts? Where he helpfully analogizes Groupon to a drug that turns people into shuffling, addicted zombies and destroys their lives? It's just sad.
- pbreit 11y ago
  Totally disagree. Andrew is a super smart and generous guy, built an extraordinary company, albeit not as successful now but still multi-billions in value. Local business, a totally admirable market to serve, has a very difficult time marketing and Groupon is/was a godsend.
  - wpietri 11y ago
    Not knowing him, I have no opinion on his smartness and niceness. But as far as I'm concerned, Groupon was an enormous pump-and-dump built on a short-lived marketing fad. I agree that local business is a great market to serve, which is why I think Groupon is especially repulsive. In his race to cash out, he caused enormous pain to an enormous number of local businesses. Whether he did that willfully or negligently I have no idea, but either way his attempt to chipper his way out of Groupon's history is sad.
sparkzilla 11y ago
I was one of the many unhappy customers of this company. They made tons of money for themselves and investors using an aggressive and unpleasant sales force to overpromise results to small businesses, who had to discount deeply to make the system work, and who never got any repeat business. This guy was responsible, and he still doesn't get it. They can burn for all I care.
- deleted 11y ago
  [deleted]
- pbreit 11y ago
  Curious what happened. Were the economics really bad for your business or did the response overwhelm? Slow payouts?
  - sparkzilla 11y ago
    The business model was bad, and the sales tactics were bad, and the handling of the contracts was unethical at best. The salespeople pushed us to give a big discounts on the list price of our service, saying that the promotion would bring long-term business. But that never happened due to the one-off nature of the advertising. Instead, we made a loss on every customer due to the discount, while Groupon made their commission (25% of the list price if I recall correctly) whatever happened. Making excessive money while your clients lose money is not a viable business model. So we dropped them, as many others did, and they moved on until they finally ran out of victims. If I recall correctly, the second time we tried, they changed the contract percentages on us without informing us, similar to the story another business owner tells in a comment on the Medium post: http://bit.ly/1SRjksX http://bit.ly/1SRjksX
    - pbreit 11y ago
      You do understand that with traditional advertising you spend money with no guarantee at all that it turns into sales? I don't understand why people are so down on advertising that guarantees foot traffic when most/all other advertising is a total crap-shoot.
danso 11y ago
I found the little plug for his current startup to be interesting: > My current company, Detour, is for all intents and purposes at its current stage, a small local business. We sell walking tours of San Francisco. To be successful, we have to do the exact same things other local travel companies do. That description brought to mind exactly the startup SideTour, which Groupon bought out in 2013: http://techcrunch.com/2013/09/18/groupon-buys-sidetour-to-add-more-local-bespoke-activities-to-its-grouponlive-events-business/ http://techcrunch.com/2013/09/18/groupon-buys-sidetour-to-ad... Sidetour did more than walking tours...I only used it once, to go on an excellent tour of the now-defunct 5Pointz in New York...and according to the TechCrunch write-up, the point of Groupon buying out SideTour was to include the kind of things that Detour purportedly does: > A little over a week after Groupon announced the acquisition of hotel booking service Blink, today comes one more purchase that moves Groupon further yet out of the realm of daily deals. Groupon has bought SideTour, a marketplace where people can book places for small-scale, bespoke activities, and post their own events, too.
- rahimnathwani 11y ago
  SideTour sounds quite different from Detour. The latter is an iOS-only audio walking tour app. There are no humans involved in content delivery (except at the creation stage, of course). It's not the only mobile-audio-walking-tour app, but its content is really, really good. (I'm a satisfied customer of Detour.)
kelukelugames 11y ago
I have yet to hear a single positive testimonial for Groupon.
- xiaoma 11y ago
  Here are hundreds: https://www.grouponworks.com/case-studies https://www.grouponworks.com/case-studies
- asah 11y ago
  I'll give one, both as consumer, merchant and partner. I have never owned stock in the company and don't know anybody there. As a consumer, I've discovered tons of new restaurants and services through Groupon. As a merchant, I ran several groupons and they kicked butt. Of course you need reasonable expectations about margin and repeat customers. As a partner, I've referred dozens of brands to Groupon Goods, who are easy to working with, pay their bills on time and pay MORE than traditional retail channels, because there zero loss/spoilage. I can't speak to sales tactics but my experience was virtually 100% positive.
ianbicking 11y ago
Ads only work when you can convince people to try someplace or something new using words and images and symbolism. There's lots of experiences and businesses that can't do that - not just because of size or money or location, but because words are fairly limited. I don't want local businesses to just have better ads; I don't even know how that would help me. Used well I think Groupon let's a business really put themselves on the line: we're willing to probably lose money on customers because we think those customers will learn the value of what we provide by experiencing that value. That's a risky proposition, but a fair one. Used that way, yes, I think it's good Groupon exists.
philfrasty 11y ago
Does anyone know of actual data (blog-articles, surveys) regarding the behaviour of Groupon customers: e.g. % of repeat customers, difference in CLV, difference in cost of customer-acquistion compared to other channels, etc. The discussion of Groupon usually ends up in „they don't add value“ vs „they add value“ but without actual data it seems easy to find explanations for both sides.
- xiaoma 11y ago
  Yes, I used to work at Groupon. As one would expect, we tracked merchant satisfaction very, very closely. Most merchants were satisfied and most did repeat business. Of course, it's usually the angriest people who are the noisiest and even in the case of very vocally happy merchants, it's not that exciting of a media story. Also it's worth pointing out that the value proposition for different types of businesses is wildly different. As you can imagine for an info product, Groupon is just like doing an affiliate deal with virtually no downside, for a high margin item like a spa it's excellent, and for something with very high unit costs, like a meal at a restaurant, the merchant has to be a lot more judicious about creating Groupons. I'm blown away by all the hate, though. Maybe it comes down to how good / aggressive the sales team is. From a merchant's perspective, Groupon should be treated like marketing. You don't spend so much money on Adwords that unit economics are bad without some plan to create repeat purchases on the back end. Why would promotional discounts be different?
  - unclebucknasty 11y ago
    >Why would promotional discounts be different? There are several differences between Groupon's model and standard discounting/advertising. The spirit of these can primarily be summed up as "most advertising services don't compete directly on price with the clients for whom they are supposedly advertising." Groupon's product was its discounts, which it sourced from local merchants, then sold to its own customers. The businesses were not so much customers, but suppliers. However, the businesses paid Groupon for the benefit of supplying the product (the discount), and yet competed directly with Groupon when Groupon sold discounts for the restaurant across the street the following week. Now, here I have discounted deeply and taken a loss, however, I cannot compete with Groupon in my efforts to retain any new customers and recoup those losses. This is because Groupon encourages a certain customer mindset, based on demand for deep discounts. This is a demand which Groupon alone can endlessly satisfy because no individual competitor could sustain such losses. However, the aggregate loss of those businesses is the very source of Groupon's profit. In short, Groupon was actually a hyper-competitor to the businesses it was supposedly serving.
InfiniteEntropy 11y ago
Groupon harpooned itself in my eyes right after they harassed me for having a 'similar' email to someone who had actually registered for their service (FirstLast@example.com) whereas I had (FLast@example.com) and for some reason they 'added' my email to their lists and it took me several months to get off their crap.
oldmanjay 11y ago
Why would this be taken as anything but a plea to have the stock he holds increase in value? It's sort of mind-blowing to see this discussed as if it has any other purpose.
andrew 11y ago
Hi guys, Andrew here (author of the medium post). Thanks for the feedback. I'm just going to try to summarize the questions/criticisms that have been raised in the comments - it seems like they're all mostly hitting on the same few things. I think it would be great for Groupon to answer them. Here it goes: * Groupon attracts bargain hunters that never come back. It can't be compared to other forms of advertising because the customer you get as a result of a Groupon is less valuable than customers you get from other forms of advertising. * Groupon cannibalizes sales from customers that would have otherwise paid full price. * In summary, why should I believe that Groupon is a good form of advertising for small businesses when compared to the other options? * Whatever the answer, why should I take the word of this corporation over the many small business owners who have reported poor experiences? Let me know if I missed anything and I'll add it. Andrew
- fijal 11y ago
  Hi Andrew, thanks for taking your time. Since you're trying to capture it in one place, there is a comment hidden down with ctiticism that you did not capture in your list, here it goes: "unclebucknasty 3 hours ago That and the fact that those customers were Groupon's customers, not the businesses'. Their loyalty was to Groupon and the never-ending stream of discounts they provided. OTOH, the businesses that offered the discounts were essentially commodities in the scheme. They created the value via their discounts that Groupon then sold to customers. Few cared about the businesses, as people were not buying the underlying service or product from those businesses. Instead, the product was the discount itself, which they were buying from Groupon."
  - andrew 11y ago
    IMO that just seems like an elaboration upon / the reasoning behind "groupon customers are bargain hunters and won't come back", yes?
    - fijal 11y ago
      I think there is a distinction here between "groupon customer" and "business customer" highlighted in that comment that goes beyond the term "bargain hunter". You can still have bargain hunters that would only come to your shop once you display 10% off or once you're selling out stock that did not go away, but they still bring value to your business. That's different than a situation where neverending stream of discounts means you can change your provider as long as you're loyal to groupon. That might be just word semantics that I'm missing, but I think there is a major distinction.
j_lev 11y ago
"Are you seriously using that coupon company instead of Groupon?" This was the bitchy-voice Groupon sales rep phoning me direct when I used a different coupon service in Japan. I asked whether she was talking about the same Groupon of "Great Osechi Ryori Disaster and CEO's Fake Apology of 2011"-fame and it shut her up real quick. So many things wrong with this company, failure couldn't have happened to a more deserving bunch of people.
Hytosys 11y ago
>My experience here has reinforced the truth at the root of Groupon’s success: if you have a small business, it’s hard to reach customers. I love this. You are the founder of a big company known for being predatory, and you're recognizing that big companies are predatory.

93 points by coloneltcb 11y ago

Groupon, and Andrew, really did solve something hard: local customer acquisition and attribution. Others who had been toiling away at this problem for years were stupefied. Really? That's the most valuable local commerce company (as Andrew notes)? But when those looked in the mirror they couldn't say they were guaranteeing customers with no risk. That's a powerful value proposition to the small local business.

wavefunction 11y ago
I believe they were capable of generating an increase in customers but I think the incremental customer base rarely converted into repeat business or very loyal customers, since the sorts of people who are looking to take advantage of "too-good-to-be-true" customers are not the sort of people who necessarily express consumer loyalty. They're looking to take advantage of whatever deals (consumer advantage) are available and so the value-proposition offered by a Groupon campaign was way-overvalued by both Groupon and the businesses who bought into it.
- sbuttgereit 11y ago
  I do think there are those customers that are just looking for rock-bottom deals as you suggest, but I think the problem is more one of presence of mind than necessarily for the deep-discount shopping only crowd. For example, if you see a single ad, you don't remember the business... you need multiple impressions for it to start to stick. I think the same can hold true for new potential customers: the first visit may be positive, but in a couple or so weeks, it's not necessarily the first place they'll think of the next time they have need of the product. Groupon (and others like it) represent should be one small part of a larger marketing initiative. It can give you the opportunity to get in front of customers you wouldn't otherwise get in your store/buy your service/etc. But capitalizing on that first impression is where many small business fail. With a clever bit of follow-on marketing, I think you can get it to pay off. For example, for those that come in with the Groupon, offer another coupon for the next visit... don't make the deal so sweet perhaps, or make it a bring-your-friends sort of deal (2 for 1, etc). You train them to come back and think of you while at the same time train them to start accepting your regular pricing. Naturally this depends on your business... if it's wedding photography, you probably don't go down the Groupon type path to begin with. But if it's say, a dining establishment... this sort of thing could work. Of course. Many small business owners are simply not good business people when it gets right down to it. The small bookseller who loves and knows literature inside and out may not know how to market that business, find opportunities and niches, nor appreciate the financial pros/cons of any given decision. I think that's the biggest issue of all. They're the types likely to sign up for Groupon a get the initial visit, but never capitalize on that.
  - wavefunction 11y ago
    I agree, that's what I meant by "overvaluing" the proposition offered by GroupOn. I think they were great as an introduction or reinforcement to existing customers but the value of the deals demanded to run a promotion was too high. A staged proposition as you have outlined seems far more prudent.
pbreit 11y ago
Yep, as a local small business owner (pet boutique) I can assure you that the hardest part, by far, is getting customers into the store. Groupon is/was definitely the best service we ever found to do this. And it's pretty incredible that you only have to pay when people actually come in AND buy! I never felt very sorry for businesses who complained about the economics (even though they were bad, they were pretty straightforward). And I certainly didn't feel ANY sorrow for the businesses who "sold too much". I don't know if Groupon would have been such a hit with different discount structures. The "half off, a quarter to Groupon" was compelling to customers and easy to understand. I'm trying to envision "1/3 off and 10% to Groupon" or whatever.
- justincormack 11y ago
  Why does the customer have to know how much Groupon is getting?
  - pbreit 11y ago
    Doesn't.

crabasa 11y ago

"I often find myself wishing that the original deal-a-day version of Groupon was around today; looking at the other paid options available to me as a small local business owner, I can’t imagine a lower risk, more cost effective, or higher impact way than having Groupon send a one-time offer to 500k people in the Bay Area about Detour, with a few thousand of them buying it for half off." Daily deals cannot scale and Andrew knows this better than anyone. When you're small you can price daily deals in a way that works for SMBs and your bottom line. But when you're huge, you only have 365 deals per year and the price you need to charge is out of reach for small businesses. You have effectively equaled the reach of a traditional media company.

jacquesm 11y ago
Daily local deals?
- crabasa 11y ago
  Yes, daily local deals. Mason was wishing for some version of Groupon that would affordably deliver 500k emails to people in SF for his local business Detour. Such a thing does not and cannot exist.
  - jon-wood 11y ago
    Sure it can. It may not be a startup with a billion dollar valuation, but not every company has to be. You could probably make a pretty good living off something like that, especially if you can scale it to several local areas.
    - notahacker 11y ago
      500k signups in an area is a lot to ask for, especially if your daily deal email doesn't have an interesting range of products like all the other daily deal emails...
rahimnathwani 11y ago
Using Detour as an example of a local business is disingenuous. Detour's marginal cost per customer/tour is ~zero. The businesses that Groupon targets are mostly those delivering a physical good/service, like food or a massage. Those require materials and/or human effort, which are more expensive than bandwidth and electricity.

godzillabrennus 11y ago

I root for Groupon because I'm in Chicago and it's great for a company of that size to have originated here. Andrew has a great reputation in the area but Eric and Lightbank are almost universally detested which is a shame. I hope the company turns around and more importantly I hope Eric and Lightbank revisit how they treat entrepreneurs.

deleted 11y ago
[deleted]
alawrence 11y ago
I didn't realize LightBank was looked down on. I'm also in Chicago and work for a Lightbank-funded startup. Have you heard from other local entrepreneurs about poor treatment from LightBank?
- Lambent_Cactus 11y ago
  My Chicago company is not Lightbank-funded, but all I see in print is relentless small-town boosterism - what's a more reliable source for sounding out a firm's reputation?
- godzillabrennus 11y ago
  Yes, the overall mentality of anyone I talk to is don't even approach Lightbank. Word on the street is they are terrible for entrepreneurs to work with. It doesn't help that Lightbank has seemingly had high turnover and my limited interactions with them in other matters have sent me mixed messages. Again, it's a shame. Brad Feld from Foundry replies to almost every email he gets. Chicago needs a guy like that.

jackgavigan 11y ago

I'm not sure that Groupon ever had - or ever will have - a viable business model. It raised enough money when it IPO'd to keep it solvent but that safety net appears to be on the verge of running out - http://jackgavigan.com/2015/11/04/is-groupon-on-a-glide-path-to-bankruptcy/ http://jackgavigan.com/2015/11/04/is-groupon-on-a-glide-path... I'd love to know whether Mason and Lefkofsky ever genuinely believed they had created a viable company or whether they knew they were riding an unsustainable growth hack.

deleted 11y ago
[deleted]
hitekker 11y ago
My money is on the later. I recall reading an article in which Groupon got extremely tight-lipped about the viability of its business model. Like someone asked a few questions about how sustainable it would be once it scaled and then the person representing Groupon basically went into siege mode and gave only short, resentful answers. Wish I bookmarked that one.

wpietri 11y ago

That's just sad. Cognitive dissonance is a powerful thing. I can get why he wants to look in the mirror and say, "No, I really did do something worthwhile. Really, really!" And it's great that his wife is trying to buck him up. But trying to convince the rest of the world? Via rambling, need-an-editor Medium posts? Where he helpfully analogizes Groupon to a drug that turns people into shuffling, addicted zombies and destroys their lives? It's just sad.

pbreit 11y ago
Totally disagree. Andrew is a super smart and generous guy, built an extraordinary company, albeit not as successful now but still multi-billions in value. Local business, a totally admirable market to serve, has a very difficult time marketing and Groupon is/was a godsend.
- wpietri 11y ago
  Not knowing him, I have no opinion on his smartness and niceness. But as far as I'm concerned, Groupon was an enormous pump-and-dump built on a short-lived marketing fad. I agree that local business is a great market to serve, which is why I think Groupon is especially repulsive. In his race to cash out, he caused enormous pain to an enormous number of local businesses. Whether he did that willfully or negligently I have no idea, but either way his attempt to chipper his way out of Groupon's history is sad.

sparkzilla 11y ago

I was one of the many unhappy customers of this company. They made tons of money for themselves and investors using an aggressive and unpleasant sales force to overpromise results to small businesses, who had to discount deeply to make the system work, and who never got any repeat business. This guy was responsible, and he still doesn't get it. They can burn for all I care.

deleted 11y ago
[deleted]
pbreit 11y ago
Curious what happened. Were the economics really bad for your business or did the response overwhelm? Slow payouts?
- sparkzilla 11y ago
  The business model was bad, and the sales tactics were bad, and the handling of the contracts was unethical at best. The salespeople pushed us to give a big discounts on the list price of our service, saying that the promotion would bring long-term business. But that never happened due to the one-off nature of the advertising. Instead, we made a loss on every customer due to the discount, while Groupon made their commission (25% of the list price if I recall correctly) whatever happened. Making excessive money while your clients lose money is not a viable business model. So we dropped them, as many others did, and they moved on until they finally ran out of victims. If I recall correctly, the second time we tried, they changed the contract percentages on us without informing us, similar to the story another business owner tells in a comment on the Medium post: http://bit.ly/1SRjksX http://bit.ly/1SRjksX
  - pbreit 11y ago
    You do understand that with traditional advertising you spend money with no guarantee at all that it turns into sales? I don't understand why people are so down on advertising that guarantees foot traffic when most/all other advertising is a total crap-shoot.

danso 11y ago

I found the little plug for his current startup to be interesting: > My current company, Detour, is for all intents and purposes at its current stage, a small local business. We sell walking tours of San Francisco. To be successful, we have to do the exact same things other local travel companies do. That description brought to mind exactly the startup SideTour, which Groupon bought out in 2013: http://techcrunch.com/2013/09/18/groupon-buys-sidetour-to-add-more-local-bespoke-activities-to-its-grouponlive-events-business/ http://techcrunch.com/2013/09/18/groupon-buys-sidetour-to-ad... Sidetour did more than walking tours...I only used it once, to go on an excellent tour of the now-defunct 5Pointz in New York...and according to the TechCrunch write-up, the point of Groupon buying out SideTour was to include the kind of things that Detour purportedly does: > A little over a week after Groupon announced the acquisition of hotel booking service Blink, today comes one more purchase that moves Groupon further yet out of the realm of daily deals. Groupon has bought SideTour, a marketplace where people can book places for small-scale, bespoke activities, and post their own events, too.

rahimnathwani 11y ago
SideTour sounds quite different from Detour. The latter is an iOS-only audio walking tour app. There are no humans involved in content delivery (except at the creation stage, of course). It's not the only mobile-audio-walking-tour app, but its content is really, really good. (I'm a satisfied customer of Detour.)

kelukelugames 11y ago

I have yet to hear a single positive testimonial for Groupon.

xiaoma 11y ago
Here are hundreds: https://www.grouponworks.com/case-studies https://www.grouponworks.com/case-studies
asah 11y ago
I'll give one, both as consumer, merchant and partner. I have never owned stock in the company and don't know anybody there. As a consumer, I've discovered tons of new restaurants and services through Groupon. As a merchant, I ran several groupons and they kicked butt. Of course you need reasonable expectations about margin and repeat customers. As a partner, I've referred dozens of brands to Groupon Goods, who are easy to working with, pay their bills on time and pay MORE than traditional retail channels, because there zero loss/spoilage. I can't speak to sales tactics but my experience was virtually 100% positive.

ianbicking 11y ago

Ads only work when you can convince people to try someplace or something new using words and images and symbolism. There's lots of experiences and businesses that can't do that - not just because of size or money or location, but because words are fairly limited. I don't want local businesses to just have better ads; I don't even know how that would help me. Used well I think Groupon let's a business really put themselves on the line: we're willing to probably lose money on customers because we think those customers will learn the value of what we provide by experiencing that value. That's a risky proposition, but a fair one. Used that way, yes, I think it's good Groupon exists.

philfrasty 11y ago

Does anyone know of actual data (blog-articles, surveys) regarding the behaviour of Groupon customers: e.g. % of repeat customers, difference in CLV, difference in cost of customer-acquistion compared to other channels, etc. The discussion of Groupon usually ends up in „they don't add value“ vs „they add value“ but without actual data it seems easy to find explanations for both sides.

xiaoma 11y ago
Yes, I used to work at Groupon. As one would expect, we tracked merchant satisfaction very, very closely. Most merchants were satisfied and most did repeat business. Of course, it's usually the angriest people who are the noisiest and even in the case of very vocally happy merchants, it's not that exciting of a media story. Also it's worth pointing out that the value proposition for different types of businesses is wildly different. As you can imagine for an info product, Groupon is just like doing an affiliate deal with virtually no downside, for a high margin item like a spa it's excellent, and for something with very high unit costs, like a meal at a restaurant, the merchant has to be a lot more judicious about creating Groupons. I'm blown away by all the hate, though. Maybe it comes down to how good / aggressive the sales team is. From a merchant's perspective, Groupon should be treated like marketing. You don't spend so much money on Adwords that unit economics are bad without some plan to create repeat purchases on the back end. Why would promotional discounts be different?
- unclebucknasty 11y ago
  >Why would promotional discounts be different? There are several differences between Groupon's model and standard discounting/advertising. The spirit of these can primarily be summed up as "most advertising services don't compete directly on price with the clients for whom they are supposedly advertising." Groupon's product was its discounts, which it sourced from local merchants, then sold to its own customers. The businesses were not so much customers, but suppliers. However, the businesses paid Groupon for the benefit of supplying the product (the discount), and yet competed directly with Groupon when Groupon sold discounts for the restaurant across the street the following week. Now, here I have discounted deeply and taken a loss, however, I cannot compete with Groupon in my efforts to retain any new customers and recoup those losses. This is because Groupon encourages a certain customer mindset, based on demand for deep discounts. This is a demand which Groupon alone can endlessly satisfy because no individual competitor could sustain such losses. However, the aggregate loss of those businesses is the very source of Groupon's profit. In short, Groupon was actually a hyper-competitor to the businesses it was supposedly serving.

InfiniteEntropy 11y ago

Groupon harpooned itself in my eyes right after they harassed me for having a 'similar' email to someone who had actually registered for their service (FirstLast@example.com) whereas I had (FLast@example.com) and for some reason they 'added' my email to their lists and it took me several months to get off their crap.

oldmanjay 11y ago

Why would this be taken as anything but a plea to have the stock he holds increase in value? It's sort of mind-blowing to see this discussed as if it has any other purpose.

andrew 11y ago

Hi guys, Andrew here (author of the medium post). Thanks for the feedback. I'm just going to try to summarize the questions/criticisms that have been raised in the comments - it seems like they're all mostly hitting on the same few things. I think it would be great for Groupon to answer them. Here it goes: * Groupon attracts bargain hunters that never come back. It can't be compared to other forms of advertising because the customer you get as a result of a Groupon is less valuable than customers you get from other forms of advertising. * Groupon cannibalizes sales from customers that would have otherwise paid full price. * In summary, why should I believe that Groupon is a good form of advertising for small businesses when compared to the other options? * Whatever the answer, why should I take the word of this corporation over the many small business owners who have reported poor experiences? Let me know if I missed anything and I'll add it. Andrew

fijal 11y ago
Hi Andrew, thanks for taking your time. Since you're trying to capture it in one place, there is a comment hidden down with ctiticism that you did not capture in your list, here it goes: "unclebucknasty 3 hours ago That and the fact that those customers were Groupon's customers, not the businesses'. Their loyalty was to Groupon and the never-ending stream of discounts they provided. OTOH, the businesses that offered the discounts were essentially commodities in the scheme. They created the value via their discounts that Groupon then sold to customers. Few cared about the businesses, as people were not buying the underlying service or product from those businesses. Instead, the product was the discount itself, which they were buying from Groupon."
- andrew 11y ago
  IMO that just seems like an elaboration upon / the reasoning behind "groupon customers are bargain hunters and won't come back", yes?
  - fijal 11y ago
    I think there is a distinction here between "groupon customer" and "business customer" highlighted in that comment that goes beyond the term "bargain hunter". You can still have bargain hunters that would only come to your shop once you display 10% off or once you're selling out stock that did not go away, but they still bring value to your business. That's different than a situation where neverending stream of discounts means you can change your provider as long as you're loyal to groupon. That might be just word semantics that I'm missing, but I think there is a major distinction.

j_lev 11y ago

"Are you seriously using that coupon company instead of Groupon?" This was the bitchy-voice Groupon sales rep phoning me direct when I used a different coupon service in Japan. I asked whether she was talking about the same Groupon of "Great Osechi Ryori Disaster and CEO's Fake Apology of 2011"-fame and it shut her up real quick. So many things wrong with this company, failure couldn't have happened to a more deserving bunch of people.

Hytosys 11y ago

>My experience here has reinforced the truth at the root of Groupon’s success: if you have a small business, it’s hard to reach customers. I love this. You are the founder of a big company known for being predatory, and you're recognizing that big companies are predatory.