My bet is that facing insolvency and the lukewarm reaction to their IPO filings they've reigned in ad spend and are relying on their existing customers to bring in revenue, rather than buying fresh eyeballs.
If that works in the short term, it could make their growth numbers look terrible but make them closer to breaking even (if not outright profitable), possibly delaying the need to bring in fresh capital or at least making their business look like it's worth something, if not $20B.
Continuing to buy boatloads of traffic probably isn't sustainable and while it's possible they could stop buying ads altogether and have a few profitable quarters riding the wave of customers they bought over the last few years, that's not sustainable either.
We monitor millions of urls with adsense and other ad networks every day and I can confirm that Groupon is only advertising a tiny fraction of what they were 3 months ago through these channels, web-based US traffic.
I question the accuracy of these numbers. Hitwise, Quantcast, Comscore, etc, all use sample data and extrapolate their numbers based on these figures. Often the data is gathered using toolbars that are installed as part of another software package.
I work in search marketing and I can't tell you how many times Comscore or Hitwise has said a clients web traffic has taken a dive, even though the real on-page analytics are reporting the opposite. It's very frustrating that people take these numbers at face value.
From what I've seen first hand on my own websites' ad inventory along with what my $$ ad intelligence tools tell me, Groupon's US ad impressions have dropped off a cliff in the past few months. As of halfway through this month they basically stopped buying display ad inventory -- this is from the US side of things. I think they are buying more display internationally (which I am no expert on.)
Hitwise, Quantcast, Comscore, by themselves don't mean too much. When you combine them all together and you look at traffic numbers for really giant web sites they are pretty close to being accurate.
I was pretty optimistic about the daily deal sites, but Groupon (and LivingSocial to a degree as well) pulling back on their ad campaign coverage so dramatically is not a good signal. The other competitors that were spending early on (late last year) did not last very long, and it was a good signal of things to come.
Groupon has a great business model, but as with any business model that relies on buying tons of ad inventory it raises your profile too big too fast. That in exchange explodes your ad costs and eliminates your margins. At the end of the day Google and website publishers end up the winner. That's one of the reason I've split my business across lots of different websites. Had I not, I don't think I would have been able to keep it running profitably.
Update -- here is something to take a look at. Earlier this year InAdCo was running display campaigns on behalf of Groupon on a massive scale, chances are if you were using the internet you saw these ads more than once(they had some fancy in-ad signup form) If you take a look at their traffic on quantcast it had a huge spike April-May and then went to nothing http://www.quantcast.com/inadcoads.com The traffic returns in May, but as I recall it was pushing LivingSocial at that point. Their traffic has dropped off again, with neither Groupon or LivingSocial to be seen.
They were wasting a stack of money promoting their Australian site stardeals though the google display network before they even had any deals on the site for people take up. Sure I get the strategy of trying to build up a mailing list so the initial deals will sell really well but as with most things they do it's throwing a boatload of cash down now hoping they can build up some sort of defensible mailing list.
Compete and Alexa also both show a traffic drop since June. It's unlikely that they are all wrong. Also, all of these services are most accurate with big traffic sites such as Groupon.
For my area it's the same types of deals - stores, restaurants and services. It's either restaurants at 50% off or nail salons, lawn services, maid services, painters, etc. How many of those do you need? If you bought the deal from the painter, do you need another deal from a painter a month later. Once you check off those boxes of things you need or want to get done, it's just repetition for stuff you don't need anymore. There's nothing new keeping you coming back. No wonder traffic has dropped, the quality and the novelty have worn off.
In their defense eating out, getting nails done, massages, etc. are things many people do weekly.
The bigger problem is its basically an "unloyalty" program for the businesses. Why go back to the same massage therapist and pay full price? I'll just wait until the one down the street runs their 50% off deal in a couple weeks.
>I'll just wait until the one down the street runs their 50% off deal in a couple weeks. //
That may not be the worst of it - the people will wait for you to do a deal. It seems likely every new customer you gain this way will only purchase at a discount, Groupons look like ant powder to me.
i agree. many small businesses are using groupon or livingsocial to bring in foot traffic, then switching the new consumers over onto their own loyalty programs to retain them. if the consumers like their experiences, they can join a mailing list, where the vendor can send their own discounts.
this, and highly unconventional approach regarding the IPO by andrew mason (not remaining quiet during pre-IPO quiet period, recent executive reshuffling), as well as questionable sustainability, will probably delay the IPO for several months. i, as i'm sure many others, are curious as to what the company will look like in a year.
"Forrester recently predicted that the daily-deal market will be virtually nonexistent by 2016."
The market will be nonexistent is a conclusion overdrawn.Taking the statistical data and interpolating it might give us figures but it is really hard to believe that people's interest in saving money will be non-existent in four years.
What might happen ( what is happening presently) is there will be many more competitors in this market and it is very much unlikely that one competitor will be consistently able to secure all the good deals in the market.This might lead to market in which companies will thrive to get good deals with no significantly big success.
In this very scenario, any company which will be able to successfully integrate the great deals from all the websites like groupon,living social etc can be very much successful without many efforts needed to be put in.
An interesting assessment that I've heard from someone who would have reason to know is that Groupon is moving towards pivoting away from the "Daily Deal" business and monetizing their network of small business relationships using a different business model.
That would explain the reduction in ad-spend on end-user acquisition. If my sources are correct, we'll see something new popping up in the next 120-180 days from our friends over at Groupon somewhat unrelated to the coupon business.
If so and if successful, this will demonstrate the value of a good customer list. Something for business school books.
Tens of thousands of local businesses that have a history of being experimental in their marketing is not something to be sneered at. It can be pretty hard to find and contact these businesses in any kind of a scalable way.
Recent Groupon acquisitions are in line with this strategy. For example, Zappedy (acquired in July 2011), is an online CRM platform for small businesses.
Has anyone else noticed a decline in the quality of offers over the past six months? I've literally went from subscribing to several livingsocial/groupon products to gradually opting out after one too many crappy massage-related offers. In general I see fewer food-related offers.
I stopped using Groupon because businesses [in MA] were becoming mean. In most of the food deals I cashed in on, once I mentioned I was using a Groupon, their faces would go sour and it would make me feel cheap... something about the entire atmosphere would change. Anyway, I stopped using Groupons because now they just make me uncomfortable.
I am not affiliated but this service is clever in that you don't have to reveal to the waiter that you are using a coupon. You send in a picture of your receipt and they give you a refund. They can also steer diners towards off-peak hours. http://www.dailygobble.com
What city are you in? Bigger cities should have several to many options per day. The top-billed deal is usually meh for me but clicking on All Deals gives me something I want almost every day. I find that with the larger number of deals, I want to buy more often, even if the % of appealing deals is lower. That is for Chicago which is the biggest, oldest, etc market for Groupon.
I'm in New York and I subscribe to offers from Groupon, Google, LivingSocial, Yipit, Amazon, OpenTable, and Yelp (the last 3 aren't too frequent). I personally feel that the number of interesting offers has stayed the same or gone down in the past 3-6 months.
I don't have any data on this, but many of the deals seem to be in the $10 for $20 range. I feel like deals are a waste of time if they aren't for at least $20 off, since I often feel like the original product was overpriced by at least $10.
Interesting. I feel like there are more high end offers now, with a nice range of prices. But I only subscribe to Groupon and a couple of tiny tech ones.
Let's not forget that Groupon where not first to the Daily Deal concept. QVC have offered a "Today's Special Value" since 1987. Woot.com have been going since 2004. Groupon is certainly a great evolution of the Daily Deal and a new genre of Daily Deals but not the origination. So I think Daily Deals are certainly here to stay even if the local daily deals are not.
The deal-a-day industry is an interesting phenomenon because you have companies that are internationally famous whose fame doesn't really bring any added value to businesses because their customers are local. I think Groupon would work far better for ecommerce sites because there you aren't limited to local customers, and would be willing to pay more for instant nationwide exposure. And because the audience would be enormous, they could command much larger margins and stave off competition from local sites eating up their business. Of course Groupon scaled up way too fast and is now heavily reliant on volume that only selling to a huge number of businesses can bring.
Assuming Groupon is in financial peril, if I were CEO I would think about canceling the IPO, laying off most of the employees, and switching to ecommerce deals. No matter how you slice it, brick-and-mortar deals is a losing business model for a business after a certain scale.
Obviously there is fatigue in the market due to the saturation. It has become increasingly difficult to sift through lists of deals to find the one that you're truly "interested" in. It's like sitting down with a different coupon book every day and looking for the best coupon to clip out, no one has that kind of time except for the real bargain hunters.
The market will stabilize and settle down, but I highly doubt the concept of "daily deals" or "group deals" will disappear as Forrester predicts. Discounting based on bulk-buying has been around for ages, and leveraging the internet is just a small pivot.
I think it's more a case of buying their own hype. I think they actually thought they were revolutionizing local marketing. They looked at their huge (but unsustainable) growth numbers and thought they could spend their way to a sustainable dominant position.
The only thing I read which made sense was that the acquisition offer could have included performance requirements that the Groupon team knew they couldn't meet.
Google's not stupid and wouldn't spend $6bln on something as risky as Groupon without some safety nets.
At the time, reports were that Google was offering $5.3 billion with $700 million in earnouts based on performance. Google was obviously front-loading the deal so performance wasn't as big of an issue. Google just wanted to get their paws on Groupon's network of relationships with local merchants. I imagined Google pushing local deals through adwords, or complementing the inbox deals with Gmail ads, or targeted deal commercial prerolls on YouTube videos. I bet Google didn't really care about how they performed, because they wouldn't need to be profitable on their own inside Google, they'd just need to drive more ad traffic across all properties.
Generally people interested in buying something from you will take some time to fully understand what they are purchasing. You don't offer $6 billion for a company without taking a peak at their books.
If that works in the short term, it could make their growth numbers look terrible but make them closer to breaking even (if not outright profitable), possibly delaying the need to bring in fresh capital or at least making their business look like it's worth something, if not $20B.
Continuing to buy boatloads of traffic probably isn't sustainable and while it's possible they could stop buying ads altogether and have a few profitable quarters riding the wave of customers they bought over the last few years, that's not sustainable either.