Groupon: four reasons why it might actually be the “next big thing”

We have been waiting for a “next big thing” since Twitter went mainstream some years back.  Could it be that Groupon is going to be it?  I am coming round to thinking it might be because it has a number of characteristics I find attractive.

1. It is relevant and real time

Groupon is about stuff that is happening right now in your area.  It is very specific, relevant and useful – all the hallmarks of what the world of social media (i.e. the world where information is not married to expensive distribution technologies) is all about.  No-one is going to ask the question “why should I bother with Groupon” in the same way people still ask “why should I bother with “Twitter?”.  When you see what it does, it is obvious how you use it.

2. It runs with the community tide

I have always believed that the “next big thing” in social media would be a new behaviour rather than a new tool and I have also believed that this form of behaviour would be linked to the formation of communities.  In particular that people would get together within communities to manage their interactions with institutions, in preference to allowing themselves to be managed within communities controlled by institutions.  While Groupon is a tool it sort of fits the bill in that a large part of what it does is based around the creation of communities – communities of purchase.  And also that it effectively provides a medium within which individual consumers can manage their interaction with brands.

3. It uses editorial narrative

The unique feature of Groupon is that it has an editorial department of 400 people to effectively “write the ads”.  This recognises that the one-size-fits-all approach to creative that characterises traditional advertising just doesn’t work in social media, which is a medium much more adapted to stories and storytelling.

4. It makes money

For the outset, Groupon has a real business model for making money that is rooted in what it does as a business.  It doesn’t rely on the Facebook / LinkedIn approach which is all about building a user base first and then trying to impose a revenue model on top.  In this respect, it is akin to Demand Media – another company I like – in that its business model is 100 per cent adapted to work in the social space and aligned against how its customers use the service.  This is unlike Facebook or LinkedIn who try and raise revenue on being a media platform or information channel to their users when their users actually use the service as a communications infrastructure.

Certainly – if I had money to invest I would far rather invest it in Groupon than in some personal data storage facility like LinkedIn.


  1. Rob Malcolm


    I’ve been a big fan of yours since attending a Jackfm seminar you did in Oxford. I think you are right on almost everything you post, but not on this one.

    Don’t get me wrong: Groupon is a brilliant business model.

    It addresses the most important marketing phase for businesses: Trial. And it makes the cost of acquiring Trial variable on success. The business pays nothing unless it gets results. Note: this is better than Google which addresses the Awareness marketing phase, and also makes the cost variable on success – you can see why they wanmted to buy Groupon!

    Groupon also cashes in on the goldmine of “breakage” – between 10 and 40% of vouchers are never redeemed – Groupon keeps all of this revenue.

    Groupon also uses clever Advocacy techniques to ensure its consumer base expands virally – £6 voucher for each friend who signs onto a deal!

    Groupon is the first or biggest in each market it operates, which is a further huge advantage.

    These things drive your Point 4. It is obscenely profitable. And that creates its own virtuous cycle, where it can invest in its own PR, raise even more obscene sums via an IPO etc.

    However I disagree with your points 1, 2 and 3. A proportion of consumers will always love a stupidly large “bargain”. But most will get sick of these gimmicky daily e-mails – have you read these “editorial narratives”? Sorry, but they are very lame attempts at humour and wackiness. Consumers will wise-up to the fact that they are not using all the vouchers they buy. They will be frustrated by some of the quality of the deals. Most will disengage after a while. Customers will game the discounts system. Customers will demand a higher share of the spoils or defect to competing copy-cat platforms – Groupon has virtually no barrier to entry.

    My guess is that Groupon will settle-down to be a niche marketing tool to use, like Google Adwords for Awareness, but almost certainly will not be “the next big thing.” [Google used the money it raised from its IPO to expand into all sorts of other things so perhaps if Groupon can use its money wisely it will morph into something more profound]

    Keep up the great work!


  2. richardstacy


    You may be right. My prediction was not really based on a forensic analysis of its model, rather the fact that it taps into what I think are the new key trends – and also its current rate of growth. Perhaps when it gets its IPO cash it will morph into a broader, less quirky, communal purchasing model.

  3. Graeme Codrington


    I agree with Rob. I’ve actually engaged with Groupon about this, and have not had a very adequate reply.

    I actually Groupon is NOT using some of the power of social media. So, for example, they don’t connect all the people who purchased a deal together. There actually isn’t “a community” of Groupon users. They don’t use crowdsourced reviews – that’s so obvious.

    But mainly, they don’ allow you to opt out of deals you might not be interested in. I don’t want to know about tanning, teeth whitening or hair care, for example. I have no way of opting out, so I have to just ignore those daily emails. And when I start ignoring, they have problems.

    They don’t engage with their community through other social media tools. So, I sent a comment to @Groupon about this issue of opting out of certain categories of deals. I got a reply saying, “We’re listening” and nothing more than that. No follow up. And no change to the system. They might be listening, but they’re not conversing, nor responding.

    So, all in all, I see them as a new retail channel, and not a good example of social media.

    Still insanely profitable though, and one to watch. But I think they’ve just used the Internet channel of connecting many people to one objective, and not tapped into the other stuff social media could offer them.


  4. Plamen Haralambiev

    I think Groupon has good business model, but lacks of targeting on people`s interests. The price of acquiring new customers is high, so they most likely will use the money from their IPO for scaling the business and expanding on new markets. Here in Bulgaria, groupon`s analogs make good job, but the main issue remains – lack of target and more and more ignoring mails from customers. I don`t know are they have a mobile app (or platform), but the world is going mobile. So to concentrate on mobile groupon and geolocation of deals plus more focused on customers interests offers maybe are a good ideas.

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