Poopon Groupon

This state of the web bulletin reminded me that I haven’t had a chance to point and laugh at shit like this:

“Groupon is a spectacular company,” says this source, echoing the board’s sentiment.

“It’s literally defining a new form of interaction with the Internet. It has created perhaps the greatest form of advertising ever conceived. It is perfect.

“Groupon could not have existed before now. It’s a business that can only happen now because prior to now you don’t have the social elements of the Web working the way that they should and you don’t have merchants appreciating the opportunity the way they could or should.

Groupon sells coupons, not invisible condoms or no-hangover martinis. I have no doubt that Groupon can be quite profitable, but coupons have been around for a hundred years. Groupon competitors will spring up, just as they have in the real world. Retailers are going to get skeptical about whether coupon shoppers are potential return buyers or actual skinflint cheapskates, just as they have in the real world. All this second coming talk about the most ho-hum business model imaginable makes me think we’re in yet another bubble.






61 replies
  1. 1
    The Republic of Stupidity says:

    Another bubble?

    Uhhhhhhh… I vote Yes!

    BTW… General Stupidity is a close family relative…

  2. 2
    AlanDean says:

    I vote for “actual skinflint cheapskates” and in my shoppers opinion I find coupons actually cost a lot of money to redeem, chasing all over town to several stores plus coupons are typically for “middle store” items. I don’t live on Hot Pockets or Chocolate Frosted Sugar Bombs.

  3. 3
    Ryan says:

    We’ll always be in a bubble (or in the middle of one collapsing), because no politician wants to be seen as implementing a policy which counteracts economic growth, which is what preventing bubbles amounts to.

  4. 4
    Comrade Javamanphil says:

    The good news is the income gap has grown so large the number of Americans who will get burned by this bubble bursting is shrinking. At some point, soon, these bubbles are just going to consist of Wall Street wonders stealing each others’ money.

  5. 5
    quaint irene says:

    Pardon me, but do you have any Gray Groupon?

  6. 6
    BR says:

    There’s a strong argument to be made that the bubble we’re in really started under Reagan, and we still haven’t corrected that bubble, only the smaller bubbles that have followed. We’ll pay the piper eventually.

  7. 7

    […] Over at Balloon Juice, Mistermix has a complaint about somebody waxing poetic about the virtues of Groupon: […]

  8. 8
    liberal says:

    All this second coming talk about the most ho-hum business model imaginable makes me think we’re in yet another bubble.

    You think Facebook is worth $50B?

  9. 9
    Loneoak says:

    It was pretty awesome when I bought lunch yesterday and I whipped out my Groupon iPhone app and had the barcode scanned. Second coming? No.

  10. 10
    slag says:

    Funny. I just did a Groupon thing with a friend last night. It was ok, but I don’t think I’ll be doing any “Grouponing” again anytime soon. I felt as if, instead of getting a good deal on something I would normally pay a lot for, I ended up paying for something I should have gotten for free. Like I paid for a lengthy advertisement.

  11. 11
    Crusty Dem says:

    There’s already LivingSocial. Unique? Psshaw.

  12. 12
    de stijl says:

    I try hard not to hate on folks for fairly random reasons, but I must confess that I abhor coupon people. They are free to clip or click whatever to get their coupons, and buy fancy coupon organizers etc., but I may go full-on postal the next time I’m behind one of those fuckers in the grocery checkout. I just want to pull out my wallet and give them the four dollars they’re going to “save” in exchange for getting out the store ten minutes faster.

    Oh, and for fuck’s sake, if you’re writing a check please, please, please fill out everything but the amount before you see the final total, you stupid git!

  13. 13
    DougJ DougJson says:

    Someone invented a no-hangover martini?

    Why hasn’t there been a post about this?

    Please tell me this was done by good-old fashioned American entrepreneurs not liberal scientists or Godless ChiComs.

  14. 14
    Just Some Fuckhead says:

    I have real issues using coupons. Maybe it’s a result of growing up poor.

  15. 15
    Violet says:

    @de stijl:
    I’ve used Groupon. It’s a good deal if it’s something you want to buy anyway or maybe were interested in trying. If the product is good, I might be a repeat customer, but no more than with any other kind of buying experience. There’s nothing magic about Groupon that is going to make me become a repeat customer with their businesses more than with others.

    That quote to me smacked of desperation. Reminds me of the crap being tossed about during the dot com era. Did they rebuff Google or did Google not offer them enough money?

  16. 16
    sherifffruitfly says:

    @de stijl:

    Indeed. Fucking poor people. Gawd they fucking suck, right?

    /me stomps away in righteous indignation about the undignified indignities poor people subject me to every day.

  17. 17
    Zifnab says:

    @Ryan:

    no politician wants to be seen as implementing a policy which counteracts economic growth, which is what preventing bubbles amounts to.

    Any given individual politician may be reluctant to stop a bubble, but a party as a whole should be adamant about stomping them out. Sure, bubble growth looks good going in. But when it pops on the incumbent party – like it did on the Rethugs through ’06 and ’08 – it’s death.

    Clinton, admittedly, handed Bush a time bomb when he got out of office in ’01. Of course, it was a time bomb he let the conservative House and Senate set on themselves. Enron and World Com should have been huge poison pills for the party in power. But thanks to 9/11, we managed to bury our heads in the sand and pretend the Thugs knew what they were doing.

  18. 18
    FlipYrWhig says:

    @de stijl: When you were last in a grocery store, did the year start with a “2”?

  19. 19
    Captain Haddock says:

    If its something you want or need anyway, give Groupon a shot.

    How they plan on making money I have no idea.

  20. 20
    master c says:

    everybody likes it for a little while….then it’s quickly over.

  21. 21
    de stijl says:

    @sherifffruitfly:
    @FlipYrWhig:

    I am a galtian overlord! Actually, it’s just a weird pet-peeve of mine. I’m usualy very even-keeled, but coupons drive me bonkers. And I live in one of those weird mid-western states where people over a certain age still write checks for groceries.

  22. 22
    ericblair says:

    Even if we stipulate that Groupon is da shit and the greatest thing since the TV mute button, there’s this ever-present financial weenie assumption that the better the idea the more money it makes for somebody.

    I guess they figure that somebody made billions off of Beethoven’s 5th Symphony or Einstein’s general relativity, because this idea seems impossible for them to shake. Although if they did, that means that their business of viewing everything on the planet as a certain sized fungible pile of money may be misguided and petty. So there’s that.

  23. 23
    Poopyman says:

    I’m Poopyman and I approve this message.

  24. 24
    Mnemosyne says:

    I’ve been pretty happy with the Groupons that I’ve gotten, but I probably only buy one a month or less. I got a half price membership to Huntington Library and I’m expecting my first delivery of fruits and veggies from Farm Fresh to You today.

    Like Captain Haddock said, if you get the ones for things you already wanted to do anyway, they can be a good deal, but 90 percent of them are for things I’m not interested in.

    (ETA to correct name.)

  25. 25
    MCA says:

    Certainly, there’s a bubble mentality springing up around the internet again, and Groupon’s no exception. I don’t know how anyone can conceive that it’s worth billions. That said, there are aspects to Groupon that are pretty clever, and it’s not at all like coupons clipped out of the Sunday paper. The primary difference for retailers is that in order for a groupon to kick into effect, a certain volume of people need to sign up for it. So the retailers are ensured sufficient volume to make it worth their while. They can probably count on a certain amount of additional spending on top of the grouponed items, as well. It’s regularly set up as just “$25 for $50 worth of food/product at _____” so people end up picking out $75 or $100 worth of items, knowing they’re still getting a good bit off of retail. This obviously pulls the retailer a lot closer to breaking even on an individual sale. And if handled correctly, the store makes an indelible first impression on customers – their first experience is “I got 4 bottles of pretty good wine for $30 there” so there’s some soft loyalty being created.

  26. 26
    eemom says:

    I prefer plain Yellow Mustard, thank you.

  27. 27
    MonkeyBoy says:

    I hate coupons and official discount clubs. They are used as marketing promotion tools but they give no ultimate economic advantage to consumers – instead they promote a situation where consumer time is considered free and either consumers waste a lot of time or else they pay higher prices.

    I recently watched my sister arrange an airline flight and car rental. She went through a long process where she weighed bonus points and special coupons and arrived at a situation where she was told she saved 10%.

    If I wanted a similar price I would have to waste my time enrolling, accumulating, and staying on top of all the current rules.

  28. 28
    ThatLeftTurnInABQ says:

    @Zifnab:

    Sure, bubble growth looks good going in. But when it pops on the incumbent party – like it did on the Rethugs through ‘06 and ‘08 – it’s death.

    I’d like to think that, but a quick look at the bubblicious economy we had from the 1870s thru the early 1900s (with numerous depressions, or “panics” as they were called back then) and the difficulty that any Democrat not named Grover Cleveland had in getting their hands on the levers of national policy during a period of GOP dominance suggests otherwise. Sure Wilson managed to win the WH in 1912 but that election looks like a one-off owing to the GOP split between Taft and TR. It wasn’t until the Great Depression that the political climate shifted in a lasting way. By comparison our 2008 collapse wasn’t big enough to make much of a dent except in a very short term way.

  29. 29
    GVG says:

    I don’t think this represents a bubble. Its just normal advertising hype and some people LIKE being excited about things.
    There are some bubble forming, as usual but couponing? Its already a pretty big market with lots of competitiors. Any increase in overall business is probably related to poor economic times. My cousin is good at it & just signed up with groupon, but she signs up with all those types of sources. she also has friends who tell her about the good deals relevant for their lifestyle which is….just had her first kid. Diapers & kids clothes add up. Getting whole outfits or kids shoes for $1.67 after stacked coupons or $4 packages of diapers do seem worth the while.
    Our Aunt used to be great with coupons too 40 years ago so, like I said this isn’t a bubble. Its just normal. Anything to do with adds is by definition overstated to get noticed in an old saturated market. Its a shark type world and the older add sources are always getting left behind by some new up and commers who in turn are going down in a few years. I don’t think this is any change in pattern.
    Thinking its a bubble implies its new or wasn’t like this before, or maybe an increase in volume. I don’t think this is.
    I’ve also observed that some people get a great deal of entertainment out of getting bargins, more than they get going to a movie or something. Its a permanent subset of our population and has always been there. I don’t think its bigger than in the past.

  30. 30
    Zach says:

    I ran the numbers in the wake of LivingSocial’s Amazon.com deal a few days ago. GroupOn’s valued at over $60 for every coupon they’ve ever sold… which makes it a pretty good deal for LivingSocial/Amazon to sell $20 gift cards for $10. In a single day they made up a large percentage of the gap between the two companies, and earned a reputation for being able to handle a worst/best-case traffic situation.

    GroupOn’s assets are basically an e-mail list of 25 million addresses (probably not that many people) and a good public image… the product seems totally reproducible. I don’t see how that’s worth $15 billion or whatever number’s being tossed around today.

    Edit: Someone mentioned Facebook’s valuation about… $100B or so. That’s giving Facebook the same valuation per user as GroupOn has per coupon ever sold. No clue why people take hype like GroupOn’s potential $10B+ IPO or whatever at face value.

  31. 31
    TaMara (BHF) says:

    @AlanDean: This.

    I like a good coupon now and then. But when they show these women who cut their $200 grocery bills down to $.50, I want to scream, “show me the nutritional value!” Of course I’m biased because I believe real cooking should contain, you know, actual food stuff. Speaking of, this made my day yesterday: How to find real food flowchart

  32. 32
    Thomas says:

    This will likely be the end of Groupon.

  33. 33
    KXB says:

    I have not tried Groupon yet, but I do use coupons a lot. Particularly for the small business I work for, coupons for OfficeMax, Staples, and Office Depot are very valuable. With coupons, I was able to get a new 23″ monitor originally priced at $125 for $75 at Staples. We also do quite a bit of copying and binding, and coupons come in handy there too.

    But – these coupons are sent to me either through the mail or by email. I don’t go digging for them. Groupon sounds like you are working for your coupons. Ease of use is as important as the value of the discount. That is why I skip on “Black Friday” sales after Thanksgiving, because the idea of waking up at 4:00 AM to buy a TV is too much work.

  34. 34

    You know why we hear shit like this about Groupon. Because of this from the SOTU:

    None of us can predict with certainty what the next big industry will be, or where the new jobs will come from. Thirty years ago, we couldn’t know that something called the Internet would lead to an economic revolution. What we can do – what America does better than anyone – is spark the creativity and imagination of our people. We are the nation that put cars in driveways and computers in offices; the nation of Edison and the Wright brothers; of Google and Facebook. In America, innovation doesn’t just change our lives. It’s how we make a living.

    No offense, Obama, but Facebook and Google don’t “make” anything but famous cats and demographic information to sell to marketers.

  35. 35
    Bmf says:

    As a small biz owner I have used local forms of Groupon.
    I basically get a small amount of advertising for trade.
    Thus far it has not brought in any repeat biz. It is only
    skinflints looking for a deal. I will not be doing more in the future.

  36. 36
    Origuy says:

    Somewhat on topic, at least related to General Stupidity and having more money than sense: Dubai World, the artificial islands in the Persian Gulf, is sinking.

    The islands were intended to be developed with tailor-made hotel complexes and luxury villas, and sold to millionaires. They are off the coast of Dubai and accessible by yacht or motor boat.
    __
    Now their sands are eroding and the navigational channels between them are silting up, the British lawyer for a company bringing a case against the state-run developer, Nakheel, has told judges.

  37. 37
    srv says:

    Y’all have obviously not yet adjusted to the new reality under our Galtian Overlords. We are all coupon people now.

  38. 38
    The Moar You Know says:

    “Saving money” on something you didn’t need in the first place is not, in fact, saving money at all.

    Lord, the world really is full of suckers.

  39. 39
    Laura Clawson says:

    Groupon is fine. In my area, at least, LivingSocial tends to offer deals at better places.

    In any case, I don’t get the complaints in this thread about effort — you get an email, you briefly consider whether you want the deal, you either buy it in a couple of clicks or you delete the email. Then you remember to use it prior to expiration. Early on I bought one that I never used, which was a $20 lesson not to buy deals at places I’ve never gone to. But every so often they offer a deal at one of my favorite restaurants, which is just lovely.

  40. 40
    srv says:

    @arguingwithsignposts: We can have a federal spending freeze AND invest in the future at the same time. Coupon Economics.

  41. 41
    Fang says:

    We’re not in another bubble – but we do have some very prominent “bubbled” companies getting a lot of attention (Groupon, Facebook). Plenty of companies are chugging along quite fine.

    Groupon, no matter how valuable now, just can’t maintain. Between an easily-emulated business model and previous examples of such services declining in value, I don’t see it lasting.

  42. 42
    Joel says:

    Spectacular? Yeah, I don’t know.

    But Groupon (and its competitors) is on to a good idea, taking advantage of an opportunity that arose when the newspapers died a few years ago. And mind you, the newspapers are most definitely dead. Moreover, for all the negativity them, offering a coupon via these websites is a good deal cheaper than paying a newspaper to run a circular and then having to eat the cost of the discounts you offered. That drops the barrier to entry and allows local businesses to get in the act (as opposed to the limited club of big boys like Federated, Target, Best Buy, and Walmart).

    I wouldn’t get too invested in any one of these companies because the barrier to entry is so low. But odds are better than even that Groupon will emerge standing, even as Google readies itself to jump into the game. Now is Groupon (Incorporated) as valuable as speculators are claiming? I have no idea.

  43. 43
    debbie says:

    I think Groupon is more of a scam than a good idea for a business. A couple of months ago, I listened to a radio program (On Point Radio/NPR) which focused on Groupon. Amidst the accolades, a restaurant owner called in and said the program was untenable for him. The discount had to be at least 50%, Groupon took half of the remaining 50%, which didn’t leave the owner enough money to cover food, salaries, etc. Even worse, he said, was the insistence by customers that he continue to offer these kinds of deals or they’d never eat at his restaurant again.

    Whoever called Groupon a bubble is right.

  44. 44
    Joel says:

    @debbie: My wife told me about that story. Not to harsh on that restaurant owner, but the terms are clear to merchants. No one has to participate in Groupon (or Livingsocial, Tippr, Homerun, Zozi, Dealpop, Jasmere, CBS Local, Yollar, Dealswarm, VOICE, Freshguide, Buywithme, did I miss anyone?) and many retailers do fine without. I think the correlation between Groupon and businesses going under is that many retailers aren’t going to offer major scaledowns in price unless they’re 1) trying to generate strategic interest or 2) desperate. I think many fall in the latter category, and if their business isn’t good to begin with, a group buy isn’t going to save them.

  45. 45
    liberal says:

    @de stijl:

    …but I may go full-on postal the next time I’m behind one of those fuckers in the grocery checkout.

    Understood and agreed.

  46. 46
    Nutella says:

    @Joel:

    As you say, Groupon has come up with a way to do local advertising that is needed now that local newspapers and local radio are fading. Whether their exact model is the right one we don’t know yet but there’s a pretty good chance they will.

    They are expanding rapidly because they know their idea is easy replicate and they need to be first to market.

    Where they will succeed or fail is how they price their deals. If the cost to the local businesses is not justified by the business they get from the new coupon customers then they’ll either adjust or fade away.

    The interesting thing about it is that the costs and benefits of this kind of advertising can be measured. Broadcast advertising has always been a crock because nobody ever knows or can know if the dollars spent on a television ad led to sales that would not have occurred without it. Groupon sales, like direct mail sales, can be measured and assigned with reasonable accuracy to the advertising dollars spent.

    To those wondering how Groupon makes money: If your salon typically charges $100 for a haircut your Groupon deal will be something like 50% off. The buyer pays Groupon $50 and Groupon keeps half of that so your salon gets $25 for a $100 service. They are raking it in IF they can show the local businesses that they will get enough future business from this advertising so that they’ll keep coming back for more Groupon deals.

    It’s doubtful whether Google can compete with them because this business requires a local direct sales force and Google has never done that.

  47. 47
    debbie says:

    Joel, the owner wasn’t a dummy. I’m sure he knew what 50% off would mean in the short run, but I think the owner was mostly disappointed in the customers who were threatening not to come back without another special deal. The benefit to businesses is supposed to be all about bringing in new customers.

    Besides, why does Groupon need such a big cut?

  48. 48
    Michael says:

    @liberal:

    You think Facebook is worth $50B?

    The $50B chatroom. If Zuckerberg is smart, he’s unloading shares.

  49. 49
    suzanne says:

    I’m not a coupon nut, but I do have to say that I view shopping as a death match between myself and the Evil Corporate Overlords. The more money I save, I win! So I do certainly use coupons if I happen to see any that are worthwhile. I also try to do as much shopping as possible at places where the prices are good already—grocery shopping at Trader Joe’s, home purchases at Costco. (Though at Costco, they hand out the coupons to you as you walk into the store, which I’ve never figured out.)

    My husband and I love restaurant.com, though. They often have sales when you can get a $25 certificate for one or two dollars. By the time you meet the terms (usually a $35 bill) and buy drinks and tip, we can eat out for less than 50% of what it would have otherwise cost. And we’ve discovered some great local restaurants that we ordinarily wouldn’t have found this way.

  50. 50
    Joel says:

    Restaurant.com is so inexpensive that I feel uncomfortable using it. It’s also kind of a bummer that they make you present the certificate before service.

  51. 51
    Steve says:

    How they plan on making money I have no idea.

    Groupon is raking it in, at least for now. They take 50% of the sales price from each offering. If you pay $10 for a Groupon, the merchant gets $5 and Groupon gets $5. Its a great racket, but I also have to believe that it leaves a huge margin for other competitors to fill in.

  52. 52
    Steve says:

    Though at Costco, they hand out the coupons to you as you walk into the store, which I’ve never figured out

    A big part of the Costco sales model is impulse buys. Giving you a specific coupon as you walk in seems like a great way to steer people towards impulse buying, especially given that the size of the warehouse makes browsing difficult.

  53. 53
    Ink Asylum says:

    My girlfriend and I mainly use Groupon and similar services to buy coupons to restaurants in NYC. Eating out is expensive, especially when taking a chance on a restaurant you’ve never been to before.

    With our limited budgets, coupons allow us to eat out twice as often and be more willing to try new places. We usually spend 10-50% more than the coupon value, and always tip on the pre-discounted bill. We’ve also returned to a number of places we enjoyed, that time without coupons.

    Perhaps we’re not indicative of the average coupon user, but if all experiences are as bad as the horror stories then these sites will fail over time. I doubt they will, though, as coupons certainly aren’t a new idea. This is just a new way to deliver them, especially to a younger crowd.

  54. 54
    Three-nineteen says:

    This is an awesome business model – it makes people pay for something (a coupon) that they normally get for free. If the person then forgets to use the coupon, they are SOL, but Groupon still gets its cash. What’s not to love?

  55. 55
    Butch says:

    I subscribed to Groupon by e-mail for about 2 weeks and then quit. It doesn’t help that I live a fair distance from the nearest city but I never received one that was even remotely useful.

  56. 56
    wes says:

    not to mention that many smaller businesses hate groupon. they end up losing quite a bit of money, since the business model is customer buys groupon for X, business gets one half of X and groupon gets the other half. Including the discount, the business basically sells their stuff for 1/4 the price.

  57. 57
    jibeaux says:

    I subscribe to Groupon, Twongo, and LivingSocial and have used all of them. I like them to try out places I like, or might like. But I agree with what some other folks have said that I don’t know how sustainable it is for businesses to take $.25 on the dollar. I don’t know why Groupon needs to take the same cut that the business providing the good or service needs, for goodness’s sake. If there’s a $30 restaurant gift certificate sold for $15, then the restaurant and Groupon each take about $7.50 of that sale. That’s a pretty crazy profit margin for Groupon. Seems to me that if google decides to come in with the same deal but let the restaurant have $12 of the proceeds, it’s all over for Groupon, the businesses will just stand in line to deal with google.

  58. 58
    tad sketchy says:

    The real value of Groupon is how they figured out (almost by accident) the best way to match people to local businesses, especially service businesses. It helps that they started out in Chicago and targeted the large population of highly mobile urban professional 20-somethings who had disposable time and income. This gave Groupon enough time to build brand and cache’ to give them enough seed money to expand into other markets.

    As for sustainable, they’ll stick around as long as they don’t do something controversial/extraordinarily stupid to drive away subscribers or businesses. For all the bitching you hear from small restaurants or businesses who got overwhelmed by the response, there’s probably still a year-long waiting list of businesses who want to work with Groupon.

  59. 59
    Michael D. says:

    All this second coming talk about the most ho-hum business model imaginable makes me think we’re in yet another bubble.

    Do you know nothing about word-of-mouth advertising? For every Groupon that is sold, hundreds of people hear about the business. Groupon is NOT a coupon. People actually have to pay for the Groupon and, unlike coupons, everyone who purchases a Groupon uses it. I buy from Groupon, Half-Off Depot, LivingSocial, and Dealswarm all the time. Normally, when I do, I’ll post it to FB to get the deal free if three of my friends buy the deal. Then, when we do go the restaurant, for example, we’ll bring friends.

    So, I buy a $40 Groupon for $20. I get to the restaurant and buy probably $50 worth of food and probably another $20 in drinks/dessert. Bill? Probably $60 (minus $40 Groupon)=$20. So, for $40, I got $60 worth of food, and my friends have to pay full price. The restaurant made a killing for giving me a $20 discount (even though they only get $10 of that; Groupon takes half). And we tell people about it.

    The restaurant does great! And even if they got only 20-30% repeats, they come out way ahead in the future too.

    It’s brilliant.

  60. 60
    Michael D. says:

    …and Groupon is active. Coupons are passive. That makes a huge difference.

  61. 61
    Akak says:

    NYT had good post on the math of groupon for business owners.
    http://boss.blogs.nytimes.com/.....upon-deal/
    Merchants are paying for advertising and they need to look at it from that perspective and figure out whether it’s worth their while.

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