People are up in arms about Groupon and I understand all the reasons why.
There are two things I think people are overlooking. One is in a Comment I made elsewhere about Groupon:
How hard would it be for Groupon to switch their model from targeting local merchants to spraying discounts from national brands? For instance, instead of Fred’s Deli Grouponing cat food for ten cents a can and eating that loss, Friskies does targeted geographic campaigns like that to get rid of dated inventory they know are at local merchants? That’d be more efficient and effective than a weekly printed flyer coupon, no?. Other than doing that, given the large amounts of money I’ve seen reported being extracted from Groupon, it does smell like a pyramid.
And the second point is contained in that Comment too: that once you have those customers, you can do other things with them.
Customer acquisition costs are going to continue to rise, making scaling very difficult unless you have some strange quirky thing that goes massively viral (like the Pet Rock did in the 1970s).
So Groupon is walking a tightrope, putting down a huge bet that once they have a massive base of customers, they can turn that into even more money other ways.
It will be interesting to see if they can do that.
Let’s not forget that a little bookstore called Amazon did!
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