What's so hot about the whole economies of scale concept? It's not even a secret! (I believe this is what Costco, BJ's and Sams Club are all about, not?) Their motto is "Collective buying power". Is there anyone out there surprised by the whole idea of let's make a larger pool of people so we increase our bargaining power and we can all be better off?
I'm surprised to hear that Google allegedly offered various billions of dollars to buy this "invention". I'm even more surprised to see Groupon rejecting it! I suppose there’s got to be more to this. What is it? Well, that people actually like the concept! And many are frequently visiting the site and benefiting from the deals they offer.
I mean, if you look at it in detail, it's indeed a good idea to encourage a group of people to come together and send them to some customer craving business of their choice willing to trade some of their profit for the additional flow of customers. Of course, the promoter gets a cut, and here is where Groupon comes into play.
Just to say it briefly, this is how sometimes marketing works. There are things that seem logical to work... but don't and there is indeed the opposite thing too. This one is working (at least for now!)
The problem I see is with the viability of the entire concept in the long run. This is an extremely easy to emulate model, and as one could imagine, various companies are already working copying it, improving it and expanding it. All Internet-based business models are exposed and vulnerable to this kind of "competition". Groupon, and their obvious business model is no exception to this rule. I only hope they had a really good reason to pass on Google’s offer.
Just to say it briefly, this is how sometimes marketing works. There are things that seem logical to work... but don't and there is indeed the opposite thing too. This one is working (at least for now!)
The problem I see is with the viability of the entire concept in the long run. This is an extremely easy to emulate model, and as one could imagine, various companies are already working copying it, improving it and expanding it. All Internet-based business models are exposed and vulnerable to this kind of "competition". Groupon, and their obvious business model is no exception to this rule. I only hope they had a really good reason to pass on Google’s offer.
I agree that it is extremely easy to emulate the model, but many have already tried to copy the idea and have failed. And whats also good for the company is that since there has to be a number of people to buy it for the coupon to work, this helps Groupon get their name exposed. They are already ahead of the curve in market share, and it will be interesting to see if the competition can find a way to steal some of it.
ReplyDeleteRafael, I agree with you that Groupon's rejection of Google's offer better have good reasoning behind it. I hope the owners have something up their sleeves. Like you, I saw their business model as Costco-like too. There seems to be not enough innovation here and it is really too easy to copy. Unlike sites like Netflix who have secret algorithms to give them a core competency, Groupon seems to going on momentum.
ReplyDeleteI doubt the owners are fools here, passing out Google's offer, so it will be interesting to see the direction this company takes in the future. If they go IPO, maybe it would be a nice buy?