Groupon – Should have taken the 6 Billion…

If any of you were making wagers on when the other shoe would drop for Groupon, the person who picked January 19, 2011 would have won the pool. Why? Because Living Social finally pulled back the curtain.

Today, Living Social is selling a $10 voucher for $20 off at Amazon.com. Similar to Groupon’s GAP deal last summer, the Living Social offering is a nationwide offer. Despite voucher limits, they have sold a staggering 522,650 vouchers as of this moment. That’s over $5,000,000 in sales.

Considering that Amazon is a huge investor in Living Social, my guess is that the latter is receiving no money from today’s offer. The benefit to Living Social is going to be hundreds of thousands of new signups, some national and viral buzz, and probably some mainstream news coverage. Amazon, which sells practically everything, also benefits. They have extraordinary customer service and this offer is likely to get tens of thousands of new customers who were hesitant before a reason to try out Amazon. Even if only 1 in 10 vouchers is sold to someone who has never bought anything on AMazon before, spending $100 to acquire a new customer is probably money well spent for Amazon at a time when eCommerce continues to explode.

So what does this have to do with Groupon? Well, many people have thought that Groupon’s massive geographical presence and full bank account made it the main player in the group buying sector. SOme went so far as to declare (incorrectly) that this was a winner-take-most market and Groupon was best positioned to be the winner. But Living Social’s Amazon deal throws that theory out the window in favor of another, more logical theory: any site with a great offering can “win” while any site with crummy offerings will “lose.”

THink about all the group buying sites out there. Most of them target suburban soccer moms by offering dining and spa experiences. Occasionally something unique will show up, like Stripper Pole Exercise classes or a ride on a helicopter, but 90% of the time its either food or spa. These offers are appealing certainly, but only to a specific sector of the audience. As a result, the average buy-thru rate for deal sites is 1-4%. WIth that math in mind, an easy case can be made that the key to succeeding is having as many people viewing the deal (email, facebook, website) as possible. And as a result, its easy to see Groupon as the “winner” because they have so many people in their audience.

But the reality is that having a zillion people see a deal is simply masking the crap that’s being offered. While most marketers are content to have a 1% return on mass mailings and similar marketing, daily deal sites should be working hard to avoid this label. People see Valupaks in their mailbox and 99% think of them as junk-mail. 1% buy, giving Valupak a viable business. But is the point of Groupon (and other similar sites) to simply be online versions of Valupak? Oof.

That brings us to today where Living Social has, all at once, proven what many people suspected: offer something AWESOME and the buy through rate goes up. WAY up. The broad lesson is that instead of working to be a mass-mailer from the internet, group sites should take it to heart that the real value comes in offering something that appeals to lots of people. The more specific lesson is that Groupon isn’t the only site capable of offering something fantastic that goes viral and sells a ton of vouchers. And if Living Social can do it, why can’t KGBDeals? And if KGB can do it, why can’t DailyDeals? And if they can do it, then why not….

The point is that the shine is definitely wearring off the apple now for Groupon. Living Social has demonstrated that quirky CEOs and funny cats and interest from Google don’t sell nearly as many vouchers as offering something AWESOME. And oh yeah, in the time it took me to write this post they sold another 28,000 vouchers. Cha. Ching.

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