What I'm wondering: are any of Groupon's competitor's (AmazonLocal, LivingSocial, Google Offers, etc.) more likely to succeed? Or is the business model the biggest problem here?
I don't think the business model is quite as horrible as some make it out to be, but it certainly doesn't seem to warrant a $6+ billion valuation for Groupon and doesn't really bode well for some of its competitors. I see two major problems Groupon is facing:
1) Limited long-term market
A lot of companies have had negative or even disastrous results from using Groupon. It is clear that it isn't a good option for a lot of businesses, as it can be very costly and a lot of the customers don't return. I see two viable long-term markets for the sort of deals Groupon offers: 1) High-margin businesses where most of the expenses are related to advertising, and 2) brand new businesses with a big enough marketing budget to take a one-time hit to get their name out. This is still a pretty big potential market, but I don't think it is big enough.
2) Almost zero barrier to entry
Despite being called a "tech" company, Groupon appears to have very little interesting technology, and there is almost no barrier to becoming a competitor. More worrisome than the national competitors (ie, Google, Amazon, and LivingSocial) are the local competitors, such as TV stations, newspapers, universities, etc.. They already have established relationships with local businesses and almost certainly have lower sales costs, plus they often don't need the margins that Groupon does and can offer merchants better deals.
I see Groupon dying from fighting with a thousand other fish over a pond that is a lot smaller than originally thought. National competitors like Amazon and Google that can use other aspects of their business to lower acquisition costs and/or increase the revenue per deal might have a shot at doing well in the long term.
I can tell you one thing - as a Google shareholder, I'm really glad they ended up not spending $5 billion on Groupon.
> and there is almost no barrier to becoming a competitor
except user acquisition costs on both ends of the transcation, which are ridiculous. i doubt there is a single small business in the USA that hasn't had contact with GroupOn, or a single discount shopper who hasn't heard of them through their marketing.
I'm guessing the business model, or at least Groupon's implementation of it. The stories of companies who lost absurd amounts of money on Groupon deals and made none of it back are starting to pile up.
I wonder the same thing. I have friends working at LivingSocial, but also something about the whole business bothers me, so I'm never sure how to feel. I don't want their company to fail for their sake, but I don't really believe in it.
