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Let's stop with the Amazon analogy. Yes, Groupon, like early-day-Amazon, is bleeding cash on customer acquisition. It ends there. Amazon was building a retail

by yuvadam 15y ago

Let's stop with the Amazon analogy. Yes, Groupon, like early-day-Amazon, is bleeding cash on customer acquisition. It ends there. Amazon was building a retail infrastructure and they succeeded in providing value to their customers. Groupon is busy spending truckloads of cash on luring businesses into their pyramid scheme, while founders and early-stage VCs are cashing in. Pray tell how either customers or businesses are benefiting from Groupons. Is Groupon providing them with some service that I cannot duplicate tomorrow? Are they building some secret infrastructure that no one knows about? Follow the money, and you will see that no such thing exists. Groupon is a fraud, and it's time we call it the way it is.

ig1 15y ago
I'd like to see you build a global local salesforce tomorrow. Groupon's infrastructure isn't technological but rather operational and human resource based, something which is actually much harder to duplicate than technology. It's likely the reason that Google wanted to buy them isn't for daily deals, but the fact that they've got a huge salesforce with expertise in selling to local businesses. Local business ad spend in the US alone is a $100bn dollar market, only a tiny percentage of which is spent online at the moment, but the only way to reach this audience is direct sales. And that's something that google doesn't have the people infrastructure for.
- jerf 15y ago
  "I'd like to see you build a global local salesforce tomorrow." I don't need to build a global local salesforce for Groupon to be in serious trouble. Hundreds of people can build local salesforces in their own area, and the aggregate will cause Groupon trouble. It's a bit of a different criticism that what most people are making, but I'm not seeing a big advantage to Groupon centralizing vs. hundreds of fast-moving much smaller competitors. There's hardly any economies of scale to speak of, the market in question is effectively made of people who have minimal "brand loyalty" pretty much by definition, even if every other criticism made is false I still have a hard time seeing an outcome in which Groupon actually own the national local market, precisely because "national local market" is basically an oxymoron. Even if they don't collapse under their weight, they'll still be pecked to death by hundreds of hungry budgies.
  - ig1 15y ago
    Marketing has significant economies of scale, a nationwide marketing campaign tends to cost a lot less per customer acquired than a local one. It's very possible to own the national local market, good examples of this are Craigslist and (historical college-period) Facebook.
    - jerf 15y ago
      Most people badly misunderstand economies of scale. It doesn't mean that things just keep getting cheaper and cheaper and cheaper the bigger you get. Generally you get the most per thing benefit at the bottom, and as you scale up the gain levels off. A company may make 50 million things a year but not actually get any significant per thing savings over what they could get at 1 million things per year. Sure, there are marketing economies of scale. But they don't scale indefinitely, and by the time you're advertising to a state or at most a region of this country, you've captured them all, or as close to all as makes no difference. I don't see a huge win for Groupon here. Craigslist owns its market at this point solely because nobody will beat its price, and as for Facebook's permanent dominance (because that's the topic at hand, not a transient dominance, Groupon already has that but they won't be profitably unless they can continue that dominance for quite a while), call me again in three years, OK? Let's see where G+, Facebook, and probably at least one other competitor by then stand.
      - ig1 15y ago
        I disagree on both accounts, even in manufacturing scaling has it's limits. Being able to mass produce can't infinitely reduce costs, sooner of later you'll hit a barrier (cost of natural or human resource) which can't be reduced. Secondly no-one has permanent dominance in anything, how many market leaders from 100 years ago are still leaders today ? - it's purely a case of how long you can hold dominance for.
        jerf 15y ago
        You disagree with both points, then reiterate them? Read moar, plz.

by yuvadam 15y ago

ig1 15y ago

I'd like to see you build a global local salesforce tomorrow. Groupon's infrastructure isn't technological but rather operational and human resource based, something which is actually much harder to duplicate than technology. It's likely the reason that Google wanted to buy them isn't for daily deals, but the fact that they've got a huge salesforce with expertise in selling to local businesses. Local business ad spend in the US alone is a $100bn dollar market, only a tiny percentage of which is spent online at the moment, but the only way to reach this audience is direct sales. And that's something that google doesn't have the people infrastructure for.

jerf 15y ago
"I'd like to see you build a global local salesforce tomorrow." I don't need to build a global local salesforce for Groupon to be in serious trouble. Hundreds of people can build local salesforces in their own area, and the aggregate will cause Groupon trouble. It's a bit of a different criticism that what most people are making, but I'm not seeing a big advantage to Groupon centralizing vs. hundreds of fast-moving much smaller competitors. There's hardly any economies of scale to speak of, the market in question is effectively made of people who have minimal "brand loyalty" pretty much by definition, even if every other criticism made is false I still have a hard time seeing an outcome in which Groupon actually own the national local market, precisely because "national local market" is basically an oxymoron. Even if they don't collapse under their weight, they'll still be pecked to death by hundreds of hungry budgies.
- ig1 15y ago
  Marketing has significant economies of scale, a nationwide marketing campaign tends to cost a lot less per customer acquired than a local one. It's very possible to own the national local market, good examples of this are Craigslist and (historical college-period) Facebook.
  - jerf 15y ago
    Most people badly misunderstand economies of scale. It doesn't mean that things just keep getting cheaper and cheaper and cheaper the bigger you get. Generally you get the most per thing benefit at the bottom, and as you scale up the gain levels off. A company may make 50 million things a year but not actually get any significant per thing savings over what they could get at 1 million things per year. Sure, there are marketing economies of scale. But they don't scale indefinitely, and by the time you're advertising to a state or at most a region of this country, you've captured them all, or as close to all as makes no difference. I don't see a huge win for Groupon here. Craigslist owns its market at this point solely because nobody will beat its price, and as for Facebook's permanent dominance (because that's the topic at hand, not a transient dominance, Groupon already has that but they won't be profitably unless they can continue that dominance for quite a while), call me again in three years, OK? Let's see where G+, Facebook, and probably at least one other competitor by then stand.
    - ig1 15y ago
      I disagree on both accounts, even in manufacturing scaling has it's limits. Being able to mass produce can't infinitely reduce costs, sooner of later you'll hit a barrier (cost of natural or human resource) which can't be reduced. Secondly no-one has permanent dominance in anything, how many market leaders from 100 years ago are still leaders today ? - it's purely a case of how long you can hold dominance for.
      - jerf 15y ago
        You disagree with both points, then reiterate them? Read moar, plz.