GroupON, GroupOFF

April 3, 2012 - 4 minutes read

Sure we’re all familiar with GroupON, after all I’m always looking for my next fill of cheap-as-chips laser teeth whitening, brazilian waxes or pregnancy scans (I’m not even joking with any of these, these were actual offers in London the day that this post was written). But it appears that GroupON seemed to be missing the point a bit of late, and a lack of ingenuity seems to be seriously affecting their business model (supposing they ever actually had one).

GroupON’s end of year figures were published recently and show that they finished with a whopping $1.6 BILLION in revenues, up 419% from last year! Hooray! I hear you cheer, I’ll get the drinks in! But before you head off to the bar, I wouldn’t get too excited though, as revenue can be a very misleading figure. Profit is really where you want to be looking at, something that we’re very conscious of at Quirk (the company where I currently work) and is often preached by our company leaders.

Taking a look a GroupON’s profit figures tells a very different story… It has reported an ‘unexpected’ loss of $42.7 million. One can assume the ‘unexpected’ refers to their investors reaction when the bank calls for a second mortgage on their house…

GroupON Fertility Test

The moral of the story is not that Internet ventures such as GroupON cannot work with incredibly rapid expansion, nor that GroupONs offering is poor (hell, I would’ve invested when it first came onto the scene if I had the money!). However, as we all know, and some of us have experienced in the digital world, the devil is always in the detail. Digital firms more often implode, or wither away like Charlie Sheen’s bank balance, because of over-accelerated expansion and poor strategic thinking. Put simply, GroupON cannot rely simply on its rapidly growing user base to continue to invest in their repetitive deals. Doing so would be self-alienating. Eventually their growth will plateau, and those who are not their customers yet will have spent their money elsewhere, probably with one of GroupONs countless competitors.

Poor attention to detail, has been one of GroupON’s downfalls. An example of this can be seen with a little acid test I have created:

  • Consider you’re an existing GroupON user trying to reach your account.
  • Go to Google and type ‘GroupON’, then click the PPC result*.
  • Can you reach your account, or is the landing page simply [and hungrily] trying to capture your email address…?

GroupON have paid for that click and achieved nothing but an extra few cents on their PPC bill for the month.

  • So you return to Google and click another result, and perhaps another, until you can reach your account to print your latest GroupON voucher.

This lack of attention, coupled with their aggressive international expansion has put them in a very precarious position where many digital firms find themselves, where their only option is to sink or swim. I, for one won’t be throwing them a lifejacket, but it’s okay, they’re probably competent swimmers having completed their discount PADI introductory course seven times over…

What are your thoughts on GroupON or similar deal related sites? Do you agree or disagree with the points I make above? I’d be interested to see if I’m not the only one thinking this way…

*This may differ in other markets, but I’d be curious to know…