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The big difference is Amazon has always sold tangible goods to actual consumers. Even though they operated at a loss while taking investment, they weren't usin

The big difference is Amazon has always sold tangible goods to actual consumers. Even though they operated at a loss while taking investment, they weren't using the investment to pay out older investors. They had a solid plan for generating profit, which Groupon doesn't seem to have.

mortenjorck 15y ago
Well... Groupon has always sold tangible goods and services to actual customers, too. Customers that are every bit as fickle as the ones Amazon had to win over a decade ago. They may succeed or fail at this, but it's not like they're still looking for a business model.
- burgerbrain 15y ago
  The people who get the coupons are not the real customers in Groupons case, but rather the local shop owners. Supposedly, they've been having a good deal of trouble getting repeat customers, they need to find new shopkeepers each round to make up for the last time. Hence why people are calling it a Ponzi scheme.
- dreamdu5t 15y ago
  Not a business model, a strategy to generate profit from their current model. Groupon's current strategy is to take a customer base that doesn't generate profit, and make it larger. Yet they haven't shown any way that scaling will reduce costs much. How does capturing more merchants drive their costs down, when they have to pay significantly more for each one? Amazon had the answer of vertically integrating as much of the supply, warehousing, and shipment to drive costs down. Groupon doesn't have any way of driving costs down. That's the problem in my mind.
  - imjustatechguy 15y ago
    The founders have already found a business model that has generated them in excess of $500M. Thus Groupon for them has already been successful.
    - dablya 15y ago
      First few people in a Ponzi scheme make money as well...
  - Steko 15y ago
    Scale allows them to offer better deals -- if Groupon can generate 1,000 takers for a Dreamdu5t Cafe coupon and Google Offers can only come up with 200 then Groupon can drastically undercut whatever margin Google is taking and win your sale. Scale is THE moat in this arena. "Yet they haven't shown any way that scaling will reduce costs much." This is simply Parkinson's Second Law: expenditures rise to match income. Hence the IPO. They need as much cash now as possible in order to scale as fast as possible to build that moat as big as possible to fend off the barbarians. As the cost of getting more quality customers goes up you'd expect their costs in that area to proportionally decrease. And at that point, if they've defended their dominance in the deal-of-the-day market then they'll become massively profitable else if they're in a decent 2nd place then maybe Microsoft will buy them out for $5 bln more then they're worth, else they'll end up going the circuit city route.
    - sorbus 15y ago
      > Scale allows them to offer better deals -- if Groupon can generate 1,000 takers for a Dreamdu5t Cafe coupon and Google Offers can only come up with 200 then Groupon can drastically undercut whatever margin Google is taking and win your sale. If customers who arrive at a store through Google Offers are more likely to return to the store in the future without a coupon than customers who arrive at a store through Groupon, then stores will prefer Google Offers as a way to obtain loyal customers. And if stores prefer Google Offers to Groupon, then Groupon collapses. From the point of view of the merchants, this is all about getting repeat customers who will make up for the loss that they are taking on the coupons (or, in some cases, betting on customers spending enough in addition to the coupon to make a profit on the one sale). The moat that Groupon needs isn't scale, it's loyal merchants who will offer coupons on Groupon repeatedly - which will get users to use it. If it can't get that, then it will burn out once it runs out of new merchants.
      - Steko 15y ago
        Groupon and Living Social and Google and Facebook are all trying to convert Jane Doe to their subscriber. I find it extremely questionable that Jane Doe is going to be much more likely to come back to Sorbus Spa whether she bought her coupon at one service or the other. Ultimately the client is responsible for delivering goods and services that merit repeat business. Who does the client go with? Much like with any other advertising the one that delivers the best value. Value here is defined as # of new customers divided by the lost revenue. This will ultimately be driven by scale -- if Groupon can sell more tickets they can offer a proportionally lower margin and will be more attractive then competing services.

mortenjorck 15y ago

Well... Groupon has always sold tangible goods and services to actual customers, too. Customers that are every bit as fickle as the ones Amazon had to win over a decade ago. They may succeed or fail at this, but it's not like they're still looking for a business model.

burgerbrain 15y ago
The people who get the coupons are not the real customers in Groupons case, but rather the local shop owners. Supposedly, they've been having a good deal of trouble getting repeat customers, they need to find new shopkeepers each round to make up for the last time. Hence why people are calling it a Ponzi scheme.
dreamdu5t 15y ago
Not a business model, a strategy to generate profit from their current model. Groupon's current strategy is to take a customer base that doesn't generate profit, and make it larger. Yet they haven't shown any way that scaling will reduce costs much. How does capturing more merchants drive their costs down, when they have to pay significantly more for each one? Amazon had the answer of vertically integrating as much of the supply, warehousing, and shipment to drive costs down. Groupon doesn't have any way of driving costs down. That's the problem in my mind.
- imjustatechguy 15y ago
  The founders have already found a business model that has generated them in excess of $500M. Thus Groupon for them has already been successful.
  - dablya 15y ago
    First few people in a Ponzi scheme make money as well...
- Steko 15y ago
  Scale allows them to offer better deals -- if Groupon can generate 1,000 takers for a Dreamdu5t Cafe coupon and Google Offers can only come up with 200 then Groupon can drastically undercut whatever margin Google is taking and win your sale. Scale is THE moat in this arena. "Yet they haven't shown any way that scaling will reduce costs much." This is simply Parkinson's Second Law: expenditures rise to match income. Hence the IPO. They need as much cash now as possible in order to scale as fast as possible to build that moat as big as possible to fend off the barbarians. As the cost of getting more quality customers goes up you'd expect their costs in that area to proportionally decrease. And at that point, if they've defended their dominance in the deal-of-the-day market then they'll become massively profitable else if they're in a decent 2nd place then maybe Microsoft will buy them out for $5 bln more then they're worth, else they'll end up going the circuit city route.
  - sorbus 15y ago
    > Scale allows them to offer better deals -- if Groupon can generate 1,000 takers for a Dreamdu5t Cafe coupon and Google Offers can only come up with 200 then Groupon can drastically undercut whatever margin Google is taking and win your sale. If customers who arrive at a store through Google Offers are more likely to return to the store in the future without a coupon than customers who arrive at a store through Groupon, then stores will prefer Google Offers as a way to obtain loyal customers. And if stores prefer Google Offers to Groupon, then Groupon collapses. From the point of view of the merchants, this is all about getting repeat customers who will make up for the loss that they are taking on the coupons (or, in some cases, betting on customers spending enough in addition to the coupon to make a profit on the one sale). The moat that Groupon needs isn't scale, it's loyal merchants who will offer coupons on Groupon repeatedly - which will get users to use it. If it can't get that, then it will burn out once it runs out of new merchants.
    - Steko 15y ago
      Groupon and Living Social and Google and Facebook are all trying to convert Jane Doe to their subscriber. I find it extremely questionable that Jane Doe is going to be much more likely to come back to Sorbus Spa whether she bought her coupon at one service or the other. Ultimately the client is responsible for delivering goods and services that merit repeat business. Who does the client go with? Much like with any other advertising the one that delivers the best value. Value here is defined as # of new customers divided by the lost revenue. This will ultimately be driven by scale -- if Groupon can sell more tickets they can offer a proportionally lower margin and will be more attractive then competing services.