Why Groupon Works

Google’s recent reported $6 billion bid for Groupon — rebuffed, for now — took observers by surprise and worried the company’s investors. James Surowiecki analyzes the deal and Groupon’s business model. “Groupon, by contrast, is a much more old-school business. It doesn’t have any obvious technological advantage. Its users don’t really do anything other than hit the ‘buy’ button,” writes Surowiecki. “And its business requires lots of hands-on attention: thousands of salespeople to sell to and service local businesses, copywriters to come up with the right pitches for customers (Groupon’s clever ad copy is one of its selling points).” Despite these caveats, Surowiecki points out that “[t]hese days, the Web is full of good, solid businesses that may not be remaking the world but that are helping give people what they want. If that’s what Groupon ends up being, well, there are worse fates.” [%comments]

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  1. MRB says:

    Good for them. You don’t always need to reinvent the wheel.

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  2. KewZee says:

    “…help give people what they want” is exactly the selling point Groupon provides me. The service gives me deals in things I’m interested in (such as restaurant discounts, show tickets, etc.) that I wouldn’t find anywhere else. Today, it’s $51 for 51 issues of the Economist, WITHOUT any current student prerequisites. See if anyone can find a deal that good for that magazine elsewhere.

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  3. jonathan says:

    groupon’s bigger problem is that summarized in a piece in this newspaper recently and confirmed by a number of people I’ve spoken to about the cost of using them: it’s really high. Like really high, like losing money high unless you put a really big value on what you may get from a new customer you bring in for future repeat business. This is true for businesses like restaurants who have a cost of goods and services and less true if you’re dishing out extra capacity at a show. This suggests they won’t have much repeat business from their business customers without lowering margins.

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  4. David says:

    @jonathan (#3) – According to GroupOn, a majority of their customers want to be featured a second time so I guess your last suggestion may be wrong.

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  5. Jason Roth says:

    I question whether Groupon’s ad copy actually works, or if it’s simply the nice, lound-and-clear, clickable offer that does the trick. (I.e., I believe the copy style neither helps nor hurts.)

    Their copy is ponderous to read, clearly written by the frustrated artist and/or humorist type who would prefer to babble than sell. Way more copy than is necessary, and most of it is tedious, unfunny blather.

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  6. Rob T says:

    GroupOn is a great service but they are very good at getting you excited by ‘a deal’ that is only a deal if you would have bought the product or service anyway. For example, am I going to the local symphony because I love the symphony or rather because I think the the symphony is Ok but the tickets were 57% off?
    The tipping part can ‘suck one into to purchasing’ as well of course.

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  7. Ulysses says:

    The ad copy is unreadable. It’s the same “ironically detached” template with every single one. I’d hate for that to be my job. For the most part you don’t need to read it to get the gist of the deal, and in some cases you may want further details than the raw numbers on the coupon, but in those cases there’s usually better information located within the discussion.

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  8. Fran says:

    I love Groupon and I love Google, but I am glad Groupon turned them down. Groupon has a great business model that so many other companies have imitated. They offer great deals and have excellent customer service. Their ad copy is for entertainment, but personally, I get all the info I need from their easy to understand banner at the top detailing the deal. Groupon is the ONLY daily deal site I subscribe to.

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