For any company, a sharp increase in revenues combined with a considerable growth in a short time, means that competitors are on the way. This fact encourages that company to continuously improve and keep innovating to stay on the front edge and defeat its competitors.
One great example of this is Facebook, which started as a college project and turned out to be a 500-million user corporation. From the beginning, a number of competitors appeared, such as Hi5, MySpace and Flickr, but Facebook was always one step (or two) ahead. Offering appealing new applications or products to its users almost in a daily basis was and has been its recipe for success. Currently, Facebook (close to 1 billion revenue) is starting to think about Google (20+ billion revenues) as its main competitor. Unfortunately for Google, the social network’s growth is strong enough to think of this as a reality, at least someday in the future.
Now, let’s look at the Groupon concept. It offers coupons with huge discounts. As simple as that. The key factor here is that you will only obtain that coupon if enough people buy it, so you better spread the word. Groupon would then obtain a part of that discount if the coupons are finally sold. This has been easy enough for the Chicago-based company to have an amazing increase in revenues and new users.
Groupon’s growth has been so important that Google recently offered it $5.3 billion for its purchase (note that it’s five times the revenue of Facebook). What happened? Groupon seems to understand its opportunity and strengths so it has said NO to Google. This could be because it has some plans for expansion and some new offerings for the consumer. Let’s see how it goes. But it better step on the pedal since competitors are keeping up, especially LivingSocial.
But how can you innovate in such a basic thing as coupon sharing? Again, ask Facebook and its Places + Deals idea. The first part was launched around August, with which you could share your location (place) with friends using your mobile phone. The second, introduced less than a month ago, allows companies to advertise and offer coupons using the concept inside Facebook Places. Hence, if you are walking on South Beach you can log on to Places and, depending on your location, you can look at coupons and deals in stores or restaurants close to you, and of course share them with friends. Then you walk to that place, and only by showing the mobile screen in that store, you’re in.There are yet no figures over the success of this new application by Facebook, but it is to imagine its potential to dethrone Groupon from the top, especially when we think about the Facebook’s 500 million users.
What are Groupon’s plans? Surely it must have something in mind after rejecting Google’s offer, but it better speed up. What do you think?
What are Groupon’s plans? Surely it must have something in mind after rejecting Google’s offer, but it better speed up. What do you think?
I think, for now, Facebook doesn’t represent a strong competitor for either Google or Groupon. In the case of Google, because their core businesses are still very differentiated and in the case of Groupon because the concept of deep discounts is difficult to defeat with individual discounts. You would use the individual coupon but it is almost sure that you would visit Groupon for one of those amazing deals (50% - 90% off), simple because they are much more attractive. Likewise, in case Facebook start offering group bargains depending on your particular location, it would be very improbable to achieve the necessary quota of people to close the deal on time (or to use it immediately). Please visit My Blog for more information about Groupon sucess.
ReplyDeleteIn my personal opinion, there are still very differentiable factors which to this day make Groupon has been able to differentiate itself from the discounts that are found on specific sites such as Facebook or Google, mainly because of its unique structure that unlike the others mainly specializes in offering group discounts with extreme percentage cuts compared to the original value of the items that are being offered. Groupon has been able to catch customers that are looking for discounts that are at least to this day not found anywhere else.
ReplyDeleteFrom my point of view, selling to Google is beneficial to Groupon because it is Google. Each year, Groupon spends millions advertising though Google. If it is sold to Google, it can save a lot of money. Besides, customers' awareness of Google is much greater than Groupon. Just a merger can bring them to more customers. Actually just the news that Google makes an offer for acquiring Groupon will bring benefits to Groupon, not to mention real sell. In addition, with competition, Groupon needs to find a way to be superior and to survive. It certainly beneficial for them to sell to Google. But why dont they sell? Google's offer is not fat enough! Groupon is a new company. Only two years old, but look at its revenues and growth rate. It is amazing. It is worth more than $5.3 billion. But how much? Who knows. Maybe we can analyze it in Finance class calculating its future value.
ReplyDeleteYour post is very enlightening as it relates to two major online companies, Google and facebook to Groupon. In my opinion, I do believe that neither facebook nor Google is a major competitor to Groupon. Each of these companies are know to be the Giants in their various fields be it social networking or advertising. I believe both companies will only help Groupon grow as it is still a very young company. Some might disagree with me but I believe Groupon would have gained by selling to Google. Google is already leading the online market so having a company so strong will only help such a young online company as Groupon.
ReplyDeleteAs far as Innovating Groupon, I'm not sure where the company can go other than expand the areas in which it serves. But who knows, technology has not ceased to surprise us over the years.
Link:
http://www.marketwatch.com/story/groupon-reportedly-spurns-google-merger-2010-12-04