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Has Groupon Peaked?

Groupon revenues on the decline, competitors on the rise

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You’ve got to wonder how things would be looking if Groupon had agreed to be acquired by Google when it had the chance. Groupon has been taking the world by storm, and has been considered one of the hottest startups of the past year or so. Lots of other companies are catching on to Groupon’s game, however, and it’s looking less likely than any one company – Groupon included – will be able to “own” the deals space.

In a recent article, we looked at how new deals sites are popping up in all kinds of markets and verticals, and businesses are more than happy to spread their advertising dollars around among different ones. Google is said to have offered as much as $6 billion for Groupon, and a lot of people were shocked that they turned it down, let alone that Google would offer that much in the first place.

Should Groupon have sold to Google? Tell us what you think.

It must be quite the interesting time for Groupon.  Not only is their President and COO Rob Solomon on the way out, but the company might be planning an IPO as well as expanding in Palo Alto.  After reports that U.S. revenues were down 30% in February, more bad news comes today via Yipit, a popular site that aggregates and recommends daily deals.

According to Yipit, they ran some numbers from their database and found that Groupon is having a worse March than it did February, down 32% this month.  Yipit suggests that the decline could possibly be caused by people simply being tired of wading through big deals, but that wouldn’t explain why LivingSocial is up 59% this month.  That’s right, according to Yipit, they have pulled virtually even with Groupon in terms of revenues in the top 20 markets.  Here is the graph they show:

What could be causing this shift in where people get their daily deals?  Yipit suggests that since 25 millions people now use LivingSocial,  people are using multiple services with regularity.  It could also be due to Groupon’s targeting of specific deals for specific zips codes in large metro areas.  These deals might be tailored to an specific area but not be as desirable as the general daily deals that people are used to.  It could also be a demographic issue:

Young, single-oriented Groupon has 68% of subscribers between the ages of 18 to 34, while 64% of LivingSocial’s is 34 and above. Groupon’s competitors may have a broader appeal as the Daily Deal universe expand beyond young singles.

Google will emerge in the Deals space. Make no mistake. In fact, Google’s Marissa Mayer recently spoke about how Google already has some Groupon-like products. Then there’s Facebook. Foursquare is also doing some very interesting things for local businesses (CEO Dennis Crowley has not ruled out a potential partnership with Google either). Bing, Yahoo, and others are looking at more of a deal aggregation approach, so consumers don’t have to rely on any one deals provider. Groupon will most likely continue to remain relevant, but they may find the playing field much more level. That goes for LivingSocial too, by the way. They’ve been doing a lot of TV advertising, and have done a good job of growing their brand, but if Groupon can’t “own” the deals space, it’s hard to see why LivingSocial “can”.

The fact of the matter is that there are plenty of businesses looking to give deals to customers, and there are plenty of services that will get them in front of people.

With expanding competition in the deals market, can Groupon remain the leader? Share your thoughts.

Has Groupon Peaked?
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  • http://citypockets.com Julie Smith

    At CityPockets.com, a digital wallet for all of your daily deals, we absolutely have seen a shift from majority buying amongst the big players to a more distributed, fragmented purchasing pattern.

  • http://www.cardplatforms.com Jeff Foster

    Everyone is still in love with the story of Mark Zuckerberg turning down $1 billion for Facebook. At the end of the day, though, there is a very big difference between a social network and email spam… they should have taken the money.

  • Bob

    I’m seeing heavy Adwords advertising by LivingSocial in the last week. Most sites I visit has Livingsocial adsense ads. No, it’s not interest based ads.

  • http://UseBiz.com Jeff Schneider

    Groupons Business Model is very easily duplicable. They should have taken their buyout offer. They could always use the seed money for other unique Business Models. Another case of falling in love with their creation, without really looking at their Marketing Strategies vulnerability.

    Social Networks are in the same situation, they just don’t realize it yet!

    Gratefully, Jeff Schneider (Contact Group) (Metal Tiger)

  • http://www.dailydealpool.com Nora

    I think LivingSocial could easily surpass Groupon in the near future. They seem to be a little more stable, with a good head on their shoulders.

    • http://www.ientry.com/ Josh Wolford

      Especially as they continue to expand into more and more markets.

  • http://www.rankontoponline.com Troy C

    Not

  • http://www.rankontoponline.com Troy C

    NOT SO FAST!
    with groupon temporarily dominating with 15155714 unique visitors and Livingsocial with 6840131 unique visitors, the numbers speak for themselves.
    But it’s not over yet, one of our clients is listed with another network and we were doing some analysis and found out that there is a whole slew of coupon sites coming up the ranks and although they are top ranked, there are more on the way, this really is in it’s infancy and be prepared as they try to fight for control of this industry.

  • http://petcocoupons.info Petco Coupons

    They definitely should have sold for their own interests however, for consumers, I think it was best they didn’t sell. Coupons are big business and as you point out in the article above, other players are closing the gap, that means competition and that equates to a price drop for businesses that want to use coupons which ultimately means a cheaper product for consumers. French new wave cinema Josh???

    • http://www.ientry.com/ Josh Wolford

      Every film geek needs a little Godard in their life.

  • http://Elevateyourmarriage.com Edward

    As much as I dislike Google, this deal should have been made. It’s the lessons of the game of Monopoly & Chess in one. The Art of the Deal and thinking 3 moves ahead.

  • LongTimeObserver

    Groupon consumers form that demographic abhorred by most companies — “deal pigs”. The faster they are marginalized, the better. “Just my retail priced opinion.”

  • http://zaralockwood.blogspot.com/ Zara

    I still prefer / trust ebayers (power sellers/store owners) to buy goods myself, if I was buy something brand new for myself it would be amazon or I’d look in google, if I were looking for deals, I’d find a mommy blogger on blogfrog and they seem to know the best deals!

  • http://www.bariziwebsolutions.com BariziWeb

    Google should have acquired groupon.

  • http://www.electric-reviews.org Mark Demers

    To me it seems Google saved themselves some big money and Groupon should have sold out.

    Why would anyone refuse a deal like they were offered , i`l sell you my site for that price anyday of the year.

    Groupon blew it.

  • http://flaircandy.com Hannah

    I am no expert but when groupon said NO to Google, I was like – why???? they should have sold it is what I think they should have done

  • elwyatt

    Groupon is bad business. Its business model basically makes suckers of the business that engages Groupon. Only a small fraction of those Groupon offers actually benefit their clients. Groupon does well, and the customers might even get a real bargain, but the business that hires them has a real problem generating any profit from the offer and the subsequent fallout. I was aghast when Google made that offer and happy it fell through. There is nothing patentable about Groupon, and their marketing achievement will be impossible to maintain.

    • http://www.ientry.com/ Josh Wolford

      I have experience working at a small retail business that offered a Groupon deal. You are right, it is not for everybody, but I found that even though we were seeing people that were shopping at our store only because they had a Groupon, we also saw plenty of new customers that spent way more than the Groupon balance. We also noticed that customers who hadn’t been to our store in a awhile had their interest rekindled by the deal. I think coupon deals are going to be better for new business trying to drum up buzz rather than established businesses.

  • Bob Harter

    Groupon made a serious mistake and will pay for it. Look out for AdJuice which is targeting small communities, rather than the big markets. Also, it is connected with an up and coming Internet commerce company, giving it greater potential power.

  • http://relocatecanada.com Kai Hansen

    We are doing some advertising on our site for a new Canadian start up called “Daily Deals”. Our coversion rate according to that site is 60%.
    They are focusing on the Toronto/Ontario area and to us that looks like a smart way to do it. With 12 million people in the catch area, they will never be worth billions, but we are sure that they can make a nice profit. Another small venture chipping away on Groupons might.

    Our the appeals more to users who have incomes between $60,000 and $100,000.

  • marinus

    A good example is www.4freetime.nl

  • http://www.imergeadvisors.com Michael Gravel

    Excellent points made in which to expand upon. There are many sites which create several hundred Groupon clones each day. In addition to those who have ambitions to launch coupon sites in less served communities, many of the brick and mortar outfits themselves have websites and tools to market coupons to its (albeit smaller) database. What happens when more of the vast affiliate networks whose publishers drive traffic to online retail stores can also get compensated for driving foot traffic into retail brick and mortar stores with a mobile coupon?

  • http://doesnotmatter Reid

    Want to know why Groupon is falling? Read their absurd, stupid, too cutesy ad copy.

    Who is going to put up with that crap?

    • Brian

      I agree wholeheartedly and the adcopy is seriously why I have never purchased through Groupon.

    • say

      That’s true. So boring. What does Princess Diana’s luxurious life style have to do with Joe the dirty mechanic in town? :-) I never can get past the first line of B.s..

  • Craig Davis

    I’ve spoken with many local merchants who were not happy with their Groupon experience. Two restaurant owners lamented the inability to regulate the business influx that jammed them the first couple of days after their restaurants were featured. Another retailer indicated that the Groupon sales approach was heavy-handed and made him feel he was an “idiot” (sic) for not wanting to engage with them.

    While not a scientific observation, like many others I feel the discount coupon space is getting crowded, and will soon approach “white noise” in most people’s daily lives.

  • http://www.ecoselectwindows.com Windows Seattle

    I don’t think it has. I have some friends who aren’t registered yet. I bet there are alot of other people who don’t know either.

  • http://gigantico.tv Chris Grayson

    Groupon will go the way of Geocities.
    They should have took the money and ran.

  • http://www.thewomanmenadoreandneverwanttoleaverevealed.net James Pereira

    These numbers are quite normal. Whenever another competitor enters the market with a different target, these are the trends you will see.

    If tomorrow another competitor targets the senior segment, the trend for Livingsocial will dip or even plummet.

  • Jason

    Groupon should have sold for $6 Billion. Then open up another site (the exact same thing) and do it all over again. You have just pointed out that no one can “own” the deal space (I agree)…so they would have been $6 Billion ahead and doing the exact same thing they were already doing…and they already have the expertise.

    • say

      Oh really? ha ha ha. Do you think Groupon is a SnoKone Shack? Do you think things are that easy and Google boys are idiots? Groupon would have been prevented from opening another groupon. I mean that’s the first agreement that is signed.

  • Brian

    Yes, they should have sold. They turned down a Mark Cuban Yahoo offer. The Groupon business model is not sustainable and they don’t have any IP. The business is easily repeatable and as more and more players enter the market, the price that clients pay to have their deals on the site will drop. One last item. It’s not clear if the business model is even legal. In essence, they are selling discount gift cards and they are not adhering to state laws with respect to expiration dates.

  • http://www.clicktoshop.com Brendan McCarthy

    I would have sold. I too agree that the business model has already been copied a hundred times since Google’s offer. What is Groupon’s competitive advantage over all of the copycats?

  • http://www.freearticlesmix.com articles

    I think soon or later some copycats will take over, specially googles “Groupon look alike” since google is popular, Groupon should accept any offer they might regret it in the future.

  • http://www.lushcrystaljewelry.com/ Jewellery

    Groupon charges a really high commission rate, I guess many group buying sites are fast snapping the pie by having a much lower rate to the merchants.

  • http://www.viktoriagrace.com Viktoria Grace

    I wonder if Groupon is reconsidering taking the breakage from deals. I’m shocked businesses are even buying into that. Maybe forgoing the breakage on unclaimed groupons is what’s causing the profit drop.

  • http://www.dlmentertainment.com DLM Entertainment

    I’ve done deals with several group buying websites both in the US and Canada, and none of them have been with Groupon or Living Social. Why settle for 50% commission when other places are willing to offer you a larger piece of the pie?

    I went with kgbdeals.com twice now and did better in my second deal than I did in my first. I got a good amount of deals sold and the amount of traffic I got to my website was beyond my wildest dreams.

    There’s many players in the game and lots of them are willing to do what they can to grab your business. KGBDeals.com, Dealpulp.com, Eversave.com, WagJag.com, etc. I’ve gotten much better rates than 50% with all of them. You can too. Do your homework, ask questions, and you’ll see for yourself.

    • http://www.Shop4CarHire.com Shop4CarHire

      Thanks for the info … its easy to become blinkered with all the headline attention being given to Groupon.

  • http://www.Shop4CarHire.com ARTiSAN

    I can’t believe they were offered US$6 billion … !!!

    They def should have taken it and moved on to invest in other new ventures. How long will it be before Facebook falls out of favour and everyone says he should have taken the US$1 billion ?

    • http://www.ientry.com/ Josh Wolford

      The Facebook experience is much harder to duplicate than is the Groupon business model. And that is the core of the argument, how easy it is for competitors to provide a similar or even better experience.

  • http://3600clientaucentre.blogsmarketing.adetem.org/archive/2011/03/23/le-spam-business-peut-il-etre-durable.html Elie Liberman

    Not only they should have, but thinking about an IPO around 25 billion $ for Groupon is, to my opinion, just pure arrogance! I subscribed to the service but after hundreds of untargeted offers (besides they’re in my region), I unsubscribed. The question is then, can you build a real business on what’s something that looks like spam?

  • Heidi

    From a consumer standpoint, I’m going to say yes, Groupon has peaked. There are so many similar sites, all with urgent discount offers. I don’t see how the model really creates any brand loyalty. Really, it’s just about who has the deal you want. I recently unsubscribed from all the daily deal sites I had belonged to. In lean times, getting daily emails of deals “too good to pass up” was a constant reminder of my tight budget and actually started to make me feel bad that I couldn’t buy the offers even though it wasn’t something I necessarily needed.

    Also, among my circle of friends, we’ve taken an attitude of ignoring these deals since they have merchants selling things at such a discount and instead spending our dollars, at full price, to support those local merchants that we value and hope to keep in our community.

  • http://www.hedgehogdigital.co.uk/ SEO Bedford

    I reckon Groupon owners were a bit greedy not selling it to Google, 6Billion would be enough for the them to do come up with a new start-up. Then again we have to understand Groupon’s side of the story, if you have started a business that sky rocketed within an year or so from its launch would yo be willing to sell it?

  • Scot

    I doubt it. Retailers will prefer these guys: Vouchfor.com