July 28, 2009 76 Comments

Groupon – Clever Collective Buying Site

groupon

I think Groupon is clever in its simplicity and elegant in its design. Basically, a company puts up an offer that only triggers if enough people take the deal.

groupon In the screen grab I took, the deal is for people to attend a spa, and 25 people had to buy at the offered rate of $65 USD. 67 people (at the time of this writing) took the deal, which, if you think about it means that the spa books over $4300 in business for this one promotion. Not bad, eh?

I think there’s some there there, as the kids say.

What say you?

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  • http://twitter.com/nigelwalsh nigelwalsh

    isnt this like those TV Shopping channels, bidup.tv or similar? or maybe even a variant of priceline….

  • http://blog.eyeviewdigital.com EyeView

    Hey there, cousin! Congratulations on baby Oscar Dillon. Is this wildly inappropriate for a Chris Brogan comments section?

    As for Groupon, I think it has real advantages over bidup.tv in that it is localized per city. I don't know if it can survive as a business on its own, but as an add on to Aloqa or similar, it could be a powerful service.

  • http://www.beingpeterkim.com Peter Kim

    You might be aware that this is the second time around for group buying sites. Their first incarnation was a decade ago, in the form of Mercata, Accompany aka Mobshop, etc. This time around, they might have a better chance, given that social tools can help alert others to the presence of time-sensitive deals.

    Then again, they may not beat one of the things that killed them last time, i.e. eBay allowing companies to go direct and cutting out middle-positioned brokers like Groupon.

  • http://chrisbrogan.com Chris Brogan

    Um, I don't have any new babies.

  • http://chrisbrogan.com Chris Brogan

    I hadn't put the two trends together. You're right. I had all but forgotten about mobshops.

  • http://blog.eyeviewdigital.com EyeView

    Sorry, Chris. I was talking to my cousin, Nigel. Didn't mean to hijack your thread.

  • ryancmiller

    Chris,

    Thanks for the heads up on this. Even if the site itself isn't a winner (seems like similar concepts have been tried before), it's a great example to show clients on what can be done on the relative cheaper end. Though it seem sto only be in major cities right now, it's a great concept that can be applied and executed with one's own business.

  • http://twitter.com/chuckmartin1 chuck martin

    Interesting aggregation of demand vs. aggregation of supply. With aggregation of demand, the price/value is higher. Aggregation of supply leads to lower price and commoditization. This seems to nicely match the two.

  • picnichouse

    Hey Chris, thanks for the post!

    A few things:

    The Pure Salon deal is actually something we put up there after our main deal of the day for Boston Harbor Cruises had sold out. We sold 2,500 of those cruises, generating $100,000 in sales that day. :-)

    Peter, good memory with Mercata & Mobshop! There are a few noteworthy differences between them and us. They sold consumer goods, while we focus on local services. A big part of their failure is that their groups were rarely large enough to negotiate prices that were better than Amazon or Walmart. And sometimes you'd have to wait a week for the price on a TV to drop – deals only last a day on Groupon.

    Thanks for the mention, Chris – glad you like Groupon!

    Andrew (Groupon founder/CEO)

  • http://twitter.com/Wendy WendyPeters

    This reminds me of the $100 spa/skiing gift cards for $75 type ideas I've seen come out around Christmas time. I'm not sure about regular promotions catching on for smaller local businesses unless they're in major metropolitan areas, at least not yet… but I definitely see some seasonal/holiday potential, and perhaps a way to promote certain geographic sales for larger chains in areas that may not be seeing the numbers they would like…

  • http://twitter.com/AAinslie Alexander Ainslie

    EyeView: Your Aloqa suggestion for these guys is spot on and they should implement this fast. They could also look to provision their service to the to-be-launched AI app: SIRI

  • http://www.tommartin.typepad.com/ Tom Martin

    It's a great model. The business gets an pre-determined ROI for whatever the cost to participate is… and consumers feel like they've been invited vs interrupted. Basically the perfect direct marketing campaign I'd say.
    @TomMartin

  • http://twitter.com/AAinslie Alexander Ainslie

    The European http://www.LetsBuyIt.com was a similar aggregated buyer platform that launched in the late 90's with tons of funding (complete with a $100 million ad campaign at launch! – ahh those were the days). They flamed out post dot com crash.

    The problem is that if the model catches on again and shows signs of scaling then it is dead easy for the big guys like Best Buy and Amazon or even Service Magic to add on a Time/Volume for Discount “channel” to their distribution/revenue mix.

  • http://twitter.com/Irant Kevin Boulas

    An excellent idea! It cleverly uses the mass audience that you can now access, provides a compelling reason for someone interested in the bargain to recruit their friends as customers (which I believe is respectful of the social media “grand conversation”, and delivers, as you point out, a high volume of traffic.

    A great tip for the promotional playbook.

    Kevin Boulas

  • http://stevegarfield.com stevegarfield

    I saw a great feature about Groupon on TV. http://www.thebostonchannel.com/money/19820608/…

  • http://www.allaboutnortel.com Mark Evans

    It looks a lot like Accompany, which raised $50-million during the dot-com boom, and then imploded.

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  • http://www.facebook.com/people/Jamie-Beckland/649172266 Jamie Beckland

    I've been following Gropuon for a few months, and they seem to be an early example of Jeremiah Owyang's “fifth era of the social web”: social commerce.

    Overview here:
    http://www.web-strategist.com/blog/2009/04/27/f…

    Owyang sees this as consumer-driven product creation. Groupon is not quite that advanced, but it could move into that space with the beachhead of these aggregated deals.

    Commerce is driven by the social graph, and if enough people are interested in a particular transaction, then it goes forward. It also is a great way to play with price elasticity for businesses. Pricing models are very unsophisticated for most businesses, and this provides a great way to test different price points and gauge response in a way that doesn't cannibalize the core pricing model.

    There are several different value propositions for Groupon – much more than just a “remainder” inventory clearinghouse.

    Finally, I'll just say, where's the love for Portland, Groupon? We are just as connected as Seattle, and much more community focused than any city on your list (hello, Dallas?!), and should be a strong market for any locally-focused web service. See: Forkfly.

    I was talking with someone who is affiliated with Groupon, and told them that Portland should already be on their city list. And that's just the beginning of ideas I have for services like Groupon.

  • http://freddygipson.com FreddyGipson

    This is a very neat idea. I'm excited to see what big companies will use this. They'd be dumb not to.

  • TheMogulMom

    Groupon is a pretty sweet idea and website. What a concept Chris.

    Have you seen Boston's own http://www.DailyGrommet.com? Jules & Jeanne have quite a cool concept there, too. Every day, they feature a daily “grommet”–the latest, the greatest, the coolest and most unique products that make life easier or better. Or both. Then, they tell that grommet's “story” through a daily video and link to the product.

    Thanks for sharing Groupon, Chris. If you're looking for great deals, check out http://www.dealigg.com. I save tons of money just with the coupons I get on there.

    Heather

  • picnichouse

    We're on the way, Jamie!

    Thanks for the Owyang link – great stuff.

    - Andrew (from Groupon)

  • kat

    as a consumer folk
    surfing around the web to spend $
    i'd stop and drop some cash here

    i can get deals on *stuff* anywhere
    deals on local services?!
    ohhhhhhhhh! pretty!

    theory and opinion of style be damned
    groupon makes me feel like i'm joining with other folks to do cool stuff for less cash
    wheeee!

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  • http://twitter.com/DailyGrommet Folks@DailyGrommet

    A new, strong competitor in Boston for Groupon is Qponus: https://qponus.com/cities/boston Same idea as far as I know….

  • http://twitter.com/Ron_Yang Ron Yang

    Great call Chris – GroupOn is a legit site/service and it'll definitely be interesting to see them expand (and perhaps get a bit more hyperlocal). Covered them in more detail in a post here: http://post.ly/1rCZ

  • sally jensen

    I don't know, let's think about the numbers, the salon now owes $8911 worth of services, For which $4300 was collected. But the sales person from Groupon told me they take 50% and pays the seller in installments over 3 months time. So I can see where it's great for the buyer they get a deal and great for Groupon they make $4300 for promoting the company but the salon has to pay about $3564.00 to its staff to perform the services for a net loss of -$1424.00 and I'm not sure if that's a good deal for 67 new (and potentially not repeat clients as coupon users have a lower return rate than the average consumer). Especially since your competition is sure to be on there next week right? I don't know. It's a cost of $21 for each client….

  • WillyGee

    Other similar sites have popped up like What's the Deal DC (http://dc.sowhatsthedeal.com) that offers a deal based on triggers.

  • http://www.facebook.com/profile.php?id=686050551 facebook-686050551

    @Heather Allard….thanks for mentioning Daily Grommet.

    @Jamie Beckland. I, too, read the Jeremiah Owang piece with a lot of interest. I think he's onto something. In my own business, we are really creating consumer-driven product distribution. We ask people to tell us what are the worth–but undiscovere–products whose stories should be told, and then we shine a big light on them. (After vetting the products and stories ourselves, to be sure they are truly outstanding.) People REALLY respond to the idea of shaping what we feature…it's not just some background market research. They flood us with ideas and we really use them, and always credit the “finder” of a great product. Bottom line: everyone wants to help the “little guy” and the truly innovative, but now we have a massive platform to actually put the power in the hands of the market to do so.

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  • Name

    The groupon thing is usually a great offer and an excellent deal but I have had to ask for a refund from them. They should verify what the company can handle. I took advantage of an offer and when I called to set up the appointment I was told that the response was overwhelming and they weren't ready to sign anyone up until later and that they were very small. Maybe they should have limited the number of available offers or groupons. Planning is the key here. It is sad because there will be a lot of upset people and this company or other will miss out on the opportunity in this time of tight budgets.

  • Mike

    All this, but no actual link to the site. Come on!

  • http://www.gloomnation.com/ Grim

    This is cool but Groupon will end up going under because Google and Yahoo are already planning on providing the same collective buying service in our local communities. It is a really cool service though.

  • The Name

    How about a report on Groupon's credit card charging practices? Its own site is full of these reports. Add to that a scammy pay-for-play email list generation and its connection to questionable companies like Britesmile.

  • D. S.

    Actually, in your example, the spa would book less than $2150 in business. Groupon's fee is 1/2 the rate charged plus 2.5% interest per transaction.

  • D. S.

    Actually, in your example, the spa would book less than $2150 in business. Groupon's fee is 1/2 the rate charged plus 2.5% interest per transaction.

  • bcheffro

    Seriously, I have been having so much trouble getting in touch with Groupon's Customer Support. Their are other sites out their with better CS. CoupMe.com to me has the best deals and the best support.
    ~Brandi

  • bcheffro

    Seriously, I have been having so much trouble getting in touch with Groupon's Customer Support. Their are other sites out their with better CS. CoupMe.com to me has the best deals and the best support.
    ~Brandi

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  • Ravi

    So many collective buying sites are out there now. I don't which one to use, the newest I heard SocialBuy.com the name sounds attractive to me. Did anyone buy any deal from socialBuy?

  • http://web20matrix.com Pali Madra

    The site is an example of how ecommerce is set to evolve socially.

    Is credit card information safe with companies like Groupon? Please understand I do not doubt the company but if a disgruntled employee is all it takes to misuse this information.

  • coldfire

    It is neat and good but not surprised though. This kind of sites are everywhere but their micro scaling formula is good and working good. stumble at non-english sites as well . check http://grupp.se good one

  • http://www.toutuan.com 投团网

    Toutuan.com is looks like groupon。

  • http://www.toutuan.com 投团网

    toutuan is looks like groupon.

  • http://ToMuse.com VizionQuest

    You guys are doing a great job at Groupon. It's pretty incredible how many of these sites are sprouting up. The low barrier to entry doesn't help the big players in this market. I expect many local radio and tv stations to get in on this promotional model as well. How do you expect to handle those challenges? I've compiled a comparison table to list all these kinds of sites and display the key differences between them all. Let me know if there are any that I missed and if there are any other points of comparison that should be added.

    http://tomuse.com/group-buying-sites-coupon-dea…

  • http://demo.gmimi.com micdim

    Hi all,

    I have the same collective buying system as groupon.com.

    check this please:
    http://demo.gmimi.com

    drop me an email please for the backend account and password.

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