Forbes named it the fastest company growing - ever! Enter Groupon, the company that grew from zero to US 1.35bn in valuation in only 18 months.
But why has it been so successful?
- Business model: is based on the power of collective buying. The more people buy at the same time, the lower the sale price, because it allows businesses to sell at lower margins.
- Urgency: deals can only be purchased for a day. Buy now, or miss out!
- Exposure: invaluable word of mouth for local businesses, and fantastic use of social media. By clicking on ‘Like’ Facebook and other social media links people can spread the word by the click of a button.
- Risk free advertising/ marketing: businesses get the exposure, but they will only ever have to pay for the amount of sales this generate. The payment is based on the CPA (cost per acquisition) model, much desired by small businesses especially.
- Sampling: allows people to try at a lower cost. If they like it, they will probably want to visit the shop again, if they don’t, well, ‘it didn’t cost that much anyway’.
- Charging upfront: to get a deal, people have to purchase it first, the price of which flows immediately into Groupon’s coffers. They take a cut and pay the businesses (Groupon’s suppliers) back later.
Building on their initial success in Chicago, as Groupon founder Andrew Mason speaks about it in a Forbes video interview below, they now cover 88 US cities and 22 countries. As with many internet companies, the barrier to entry is rather low, which means that competitors have mushroomed – and Australia is no exception. Companies like Spreets.com.au, Zoupon, Jump on it, Eroo.com.au, Offerme, Scoopon, OurDeal, and Ouffer.com have all launched relatively recently.
So it is probably not much of a surprise, that Australia’s PBL Media is about to launch their version, called Cudo, backed by Channel Nine and ninemsn (my current employer).
So is Andrew Mason worried? Not particularly. He says ‘there's never been anything - radio, TV, newspaper, whatever - that could generate small business sales so quickly’. (Forbes)
And to the question of ‘what’s next’, the answer in the digital world, clearly is, more innovation. Groupon is preparing to offer more than one deal per day, and utilising an algorithm that will ‘mete out the offers by weighing customers' past purchases and geographic locations’ (Forbes).
But why has it been so successful?
- Business model: is based on the power of collective buying. The more people buy at the same time, the lower the sale price, because it allows businesses to sell at lower margins.
- Urgency: deals can only be purchased for a day. Buy now, or miss out!
- Exposure: invaluable word of mouth for local businesses, and fantastic use of social media. By clicking on ‘Like’ Facebook and other social media links people can spread the word by the click of a button.
- Risk free advertising/ marketing: businesses get the exposure, but they will only ever have to pay for the amount of sales this generate. The payment is based on the CPA (cost per acquisition) model, much desired by small businesses especially.
- Sampling: allows people to try at a lower cost. If they like it, they will probably want to visit the shop again, if they don’t, well, ‘it didn’t cost that much anyway’.
- Charging upfront: to get a deal, people have to purchase it first, the price of which flows immediately into Groupon’s coffers. They take a cut and pay the businesses (Groupon’s suppliers) back later.
Building on their initial success in Chicago, as Groupon founder Andrew Mason speaks about it in a Forbes video interview below, they now cover 88 US cities and 22 countries. As with many internet companies, the barrier to entry is rather low, which means that competitors have mushroomed – and Australia is no exception. Companies like Spreets.com.au, Zoupon, Jump on it, Eroo.com.au, Offerme, Scoopon, OurDeal, and Ouffer.com have all launched relatively recently.
So it is probably not much of a surprise, that Australia’s PBL Media is about to launch their version, called Cudo, backed by Channel Nine and ninemsn (my current employer).
So is Andrew Mason worried? Not particularly. He says ‘there's never been anything - radio, TV, newspaper, whatever - that could generate small business sales so quickly’. (Forbes)
And to the question of ‘what’s next’, the answer in the digital world, clearly is, more innovation. Groupon is preparing to offer more than one deal per day, and utilising an algorithm that will ‘mete out the offers by weighing customers' past purchases and geographic locations’ (Forbes).
No comments:
Post a Comment