The Blog of Evermore

One Groupon Deal Worth Passing On

June 16th, 2011

I may have to eat my words (perhaps for the rest of my life) but I’m thinking Groupon did Google a favor by not accepting their six billion dollar offer to buy the company. I’m just not convinced that Groupon has the staying power of some other internet juggernauts.

Perhaps after seeing the reception had by LinkedIn, Groupon recently filed for an initial public offering. Groupon is certainly the biggest name to come about in the last few years but I’m not convinced I’d want a piece of the action.

I signed up with Groupon a while back and have to say I’m a bit underwhelmed with what I’ve seen. Perhaps the service is more vibrant in other areas than my own, but most of the deals presented to me are for services that I have little interest in, such as kayaking trips and nail salons. I’ve also noticed that many (most?) of the deals are not even structured to utilize the founding concept of Groupon which is to offer special deals once a certain number of people agree to partake. This has seemingly resulted in Groupon being nothing more than an online coupon distributer. This is not a difficult concept to replicate and it’s also not one that I think retailers are going to continue to pony up a significant portion of their revenue to utilize.

I know Groupon (and others) are implementing the concept of making offers available to people based on their physical location as determined by their phone. But really, how swayed are people really going to be to stop what they are doing and run into a nearby store so that they can save a few dollars on an item they may or may not be in the market for? The concept would seem to be more effective for restaurants, but again, how interested are restaurants going to be in getting into a bidding war with their nearby competitors? And finally, how many advertisements are people going to want delivered to them as they drive or walk near participating retailers? This appears to be the case of implementing something because you can rather than being driven by fulfilling a need.

Factoring in the low barriers to entry for competitors, a likely diminishing profit per transaction and a consumer whose initial excitement of the concept is likely to wane, Groupon does not represent an attractive long-term investment.

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