A blog for students of Professor Kagan's Digital Marketing Strategy course to comment and highlight class topics. From the various channels for marketing on the internet, to SaaS and e-commerce business models, anything related to the class is fair game.
Friday, June 03, 2011
Thoughts on Groupon's IPO
I've been following Groupon and learning more about their business model for a while now. Purely as a consumer, I love the deals that Groupon offers but lately have been ignoring most of their e-mails. Too many deals are offered in each one and I don't have the time/inclination to go through them, especially since I've never heard of most of the restaurants and want to check them out on Yelp before I buy one at this point. Apparently, most people don't feel the same as Groupon is now preparing for its IPO and there is a lot of hype; it might end up valued more highly than Google at its IPO. As an MPH student, I don't know the intricate details of how tech bubbles or other bubbles grow and burst, but to me it seems like something to definitely keep an eye on. Groupon has a great model and a ton of subscribers, but I've read a lot of negative feedback from many small businesses that have worked with them. I ate out with a friend last night using a coupon from a different site similar to Groupon who told me she thinks that any business that uses them is probably struggling. It seems to me that they will have to come up with some other innovation before they start running out of good deals to offer. Luckily it might not be that big of a problem in NYC when there are always struggling restaurants and new restaurants looking to get their name out there, but NYC is a unique market.
Your friends statement that any company that uses Groupon is a struggling company is a compelling thought. Many companies use Groupon because it is an easy way to reach millions of potential customers and allow the customers to sample the services at a discounted rate. The idea behind this is that the customer likes the product or service and through word of mouth and repeat business, the business is able to build or expand their client base. However, if the customers who buy Groupons have a preconeceived notion that the businesses advertising on Groupon are struggling, then Groupon advertising actually turns out to be a negative message and maybe the businesses should stay away from it.
ReplyDeleteAnother problem that businesses might face with Groupon is that it is now a hunting ground for deal seakers instead of customers who want to try new vendors. Hence, is a discount customer likely to be a loyal customer? The two may not be compatible and therefore the whole advertsing campaign may not reap the benefits it sought.
I would wait for the facebook IPO. Also my observation is that all these social media companies want to go public before facebook IPO as it will leave nothing for them for investment. Groupon and livingSocially are SME's with a very niche market verses facebok and lucky linkedin.com
ReplyDelete