
Why Groupon is Overvalued - phil_KartMe
http://www.philmichaelson.com/monetizing-content/groupon-is-overvalued/
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thomaspaine
I was talking to a VC the other day about Groupon. According to him, every
local business he's talked to that's used Groupon has universally had a bad
experience with it. Groupon customers rarely turn into repeat customers, which
is the main incentive for a business to use Groupon. This shouldn't be too
surprising given that most Groupon customers are probably very price sensitive
and in deal hunting mode.

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paulgb
> As a result, people are more often looking for, and more socially
> comfortable using, coupons.

I think the coupon argument is a red herring. The way I see it, there are two
types of coupons: the price discrimination variety and the early-adopter-
advantage variety. The former category includes things like grocery flyers and
has a certain stigma associated with it -- which is why it works (if everyone
clipped grocery coupons, the store would be making less money, not more). The
latter category is where Groupon fits in, and I don't think it has the same
stigma as the former, nor do I think the recession will affect it as much.

Flashing your iPhone to save 60% on surfing lessons sends different social-
status signals than clipping newspaper coupons to save 25 cents on canned
soup.

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slowpoison
Without the real financials at hand, it's hard to tell if they are overvalued
or not. There are numbers being thrown everywhere... but I'd take them with a
grain of salt unless backed by hard evidence (which is lacking).

Overvalued or not, everybody knows Groupon is working. Customers are crazy
about it. My wife checks it as the first thing in the morning. And there's no
sign of businesses giving up on offering deals.

As for the businesses who don't like it, if they are looking at making profit
from the one-shot Groupon traffic, I think they are wrong. Think of what you
spent on Groupon as part of your advertising expenditure. Using Groupon, you
are putting your name out there in BIG'N'BOLD along with an opportunity to
show them how awesome you are.

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johnrob
I would think the biggest issue with Groupon is the type of customer they send
to your business. Is the Groupon demographic likely to produce valuable long
term customers? I am skeptical, because the trait being selected is price
sensitivity.

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antidaily
An article in Inc recently quotes a couple businesses that only ended up
breaking even on their Groupon coupon. So the businesses are just hoping
people come back for more with is less than guaranteed.

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WillyF
I would think that breaking even on a Groupon would be the desired result. The
point of Groupon, just like advertising, is customer acquisition. It's really
all about lifetime value of a Groupon acquired customer. Companies need to
track that to really judge whether Groupon is a worthwhile investment, but if
you break even on the initial Groupon, then the ROI has to be positive unless
your product/service is super crappy.

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sfall
I think it has to be said that a successful business does not have to be a
unique business. This is about how they don't have exclusive deals, who said
they did?

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phil_KartMe
I agree a successful business need not be unique. For example, many blogging
platforms are and will be successful (e.g., tumblr, posterours, blogger,
wordpress, etc).

However, if the consumer value proposition is built on providing exclusive
deals, than to preserve your audience's trust, your deals need to be
exclusive.

Please note, the article was also about how Groupon: -has no top not repeat
local customers -has inside investors selling -benefits from a temporary
trends towards coupon redemption

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TotlolRon
Price is where supply meets demand. Not a comment just a reminder.

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phil_KartMe
overvaluation - too high a value or price assigned to something

overvalued - Describing a security trading at a higher price than it logically
should.

[http://www.google.com/search?q=define%3A+overvalued&ie=u...](http://www.google.com/search?q=define%3A+overvalued&ie=utf-8&oe=utf-8&aq=t&rls=org.mozilla:en-
US:official&client=firefox-a)

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TotlolRon
yah, Value is by definition subjective. And here the security is not
"trading". It is "one time, in band camp, I bought some stock". So, the
buyer's value is "the value", until some other buyer (not blogger) steps in
with their subjective "value". Discussion is sort of useless.

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phil_KartMe
fair. and we don't know terms (e.g., liquidation preferences).

