Morning Folks!!
Now let me tie the last 2 posts together as they are all related and it shows that Google is under siege. Now that is nothing new. What's new is it is now costing Google a LOT of money, a lot of customers and for the first time they are being reactive on their heals not their toes.
It was actually my brother that discovered Groupon just 1 year ago. And until this week, I have never actually used a Groupon or purchased one.
So Brother#1 buys a Groupon for 50% off a boat charter on a specific day. Brother #2 asks “What if it rains that day?” Brother #1 did not think of that. I don’t know if they have a rain check or not. But illustrated the first challenge. But the risk might be worth the reward for the customer. Just depends.
Now let’s fast forward to now. Last Sunday I had a Groupon for a place that served breakfast that I had never been to. So at the end of the meal I whip out my Groupon and the Owner whips out his list and we begin to talk.
I asked him how he liked the Groupon. He said he loved it. He said he sold 400 of them. I told him that was the first time I had been there after living in the area for 12 years and that it was working. He was thrilled and started telling me about all the new faces he was seeing and how good business was.
Point is he saw the results. He could measure everything. It was so simple. With Google, you can wipe that smile right off. He hates wasting his money. Etc Etc. So for those that think those are different dollars, I beg to differ.
If you have a $1000 budget, you have more choice now than before and when you are faced with that choice, Groupon wins. Newspaper, direct mail, Google, Yellow Pages, Radio, TV, Magazines, Billboards and now Groupon. It eats at ALL of their profits and bottom lines. They all compete for that $1000. or $100k or $1M or whatever.
What was in concrete for decades is now fluid. It's changing and when things change you have winners and losers. Groupon is the big winner and Google is the big loser. Many don't see the connection. I do and I just showed you why by just touching the surface of all this and it is much deeper and will play out on many levels.
This hole in the wall restaurant told me everything I needed to know. If it works for him, it can work for anyone that knows how to run and grow a business. The owner is back in control and he is online and cool and all the rest. I told 12 people about this place this week. Some knew, some did not. Some that go will share it with their friends on Facebook. So Groupon can become the nucleus of your marketing efforts if used correctly. Or Rue La la or Gilt or whoever is next. It does not matter. It matters that it WORKS! It matters that it deflects and disrupts dollars from going into one company pocket as opposed another pocket.
So as I wrote last year……I am happy Groupon resisted Google’s offer. That was a BOLD move and it illustrates how much they believe in what they have. Groupon gives you the power to open a business and effectively market it from day #1.
Yes, others can/will/have copied their model. They do that because it works and that only accelerates Groupon’s marketing efforts. You can't measure the effectiveness of Groupon the way many here do. You have to ask yourself how much is a new customer worth?? How many more times will he come in and pay full price?
Did you consider that you could create an INSTANT business with just one Groupon? Just think in terms of a grand opening where most give things away. There are 'Flash crowds', you could create a 'Flash Business'. Sell umbrellas when it rains.
This is what I wrote about Groupon on December 15th: Some folks did not understand where I saw this, now it should be more clear.
“Then in a year from now they are likely to really get down to comparing results and see that Groupon is really a much better buy than Google. Which would explain why Google wanted to buy them and Groupon said no. Thank you Groupon!! That was a bold move and a win for all of us whether you see or understand it or not. Google buys anyone they see as a threat so they can control everything. Our job is to help those that can challenge them and gives us all alternatives. So pray that Groupon and Facebook and Twitter and others stay independent. If you wake up one day and Google bought them, it will be a bad day.”
http://www.ricksblog.com/2010/12/the-budgets-for-2011-and-beyond-cpas-going-nuts.html
The world changed in the last months. Facebook, Groupon, Twitter, LivingSocial and others have changed the course of things and the Google Highway is off kilter.
So I salute all of these companies for changing the dynamics and the playing field. This is why I have been saying this is like the first year of the Internet, Because now there are things to copy and to build on. There are now more and more profitable working models and competing forces. This rose is blossoming and we are finding that Google may no longer be the center of the universe. That's a BIG change. That's a GREAT thing.
So I LOVE Groupon. I think Facebook is the Hula Hoop of our day. And Twitter is the soapbox we each have for whatever audience we have. There are so many more emerging it will be hard to keep up with.
But the bottom line is that Groupon is the FIRST truly great marketing concept that works for any size business doing about anything. Groupon is an INSTANT business if you look at it properly. Groupon is a great tool and there will be so many ways to take advantage of it. Sorry, but Google can't compete with that. They are so busy screwing over folks that the first alternative that came along would pull many away. So many in fact that Wall Street is not going to like what they see. This is just the begining of their problems. When they see just how vulnerable the 'Invincible' is, they are going to be shocked.
Now Google is not going anywhere soon. Matter of fact, some would say their best days may be ahead of them. But the Arrogant Google that said it would never split it's stock and was going to be like Berkshire Hathaway, well that Google.....is DEAD! That Google is not going to go where they expected. That Google is off course and just searching with them is becoming more and more painful.
Do I blame Amazon? Walmart? Verizon? Sears? Best Buy? Kmart? NextTag? Amazon? Target? Amazon? No, not at all. But Google may win the stupid award. Why? They may be making themselves irrelevant. When you keep serving up those results in half the things you search for, well that's just a list of national chains and some guys pay to be in the list twice. What happened to SEARCH? This is should be called the OBVIOUS ENGINE! Search you would expect a result you would not have already thought of. DUH!!
Things are moving so fast nobody can truly keep up with the innovations. Google can't keep up with the future which is changing faster than I can write this. Now Google is not Alta Vista. They have invested wisely. But Google may have lost their balance. The VC guys like Schmidt ran the company a certain way. ran it for Wall Street. And failed the last few years. But they did permanent damage and set a bad tone over those years. No longer that warm fuzzy company. What happened to a company folks used to love? My advice, get back to basics.
I enjoy looking at things in a number of ways and from many viewpoints. The way to do that is make a bold statement and then discuss. All relative points get added to the equation on either side of the argument and that always helps make things more clear no matter the subject. Many of you think there is no relationship whatsoever between these companies. I see an entire different picture coming. As always, time will tell. But I still see what I see and I am just sharing that with you the reader.
Have a GREAT Day!
Rick Schwartz
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lee
I agree with what you are saying on results from local business. My wife and all her mates are loving Groupon. They have been buying up face cream offers and crap like that for month from local stores. My Mum raves on about it (on the wifes recommendation) and has bought some stuff, and she is near 70 years old. It’s working and Joe Public gets it, big time.
I guess if they ever get their teeth into their affiliate scheme properly the next company who should maybe watch out is Amazon.
Bill Roy
Groupon and other challengers to Google will survive and prosper because they have a clear target at which to aim their efforts, i.e. Google. All the time new and innovative methods will be designed and developed by individuals and companies to cut into the Google market place, and Google can in actual fact do very little to stop such incursions until it feels the pain and decides to try and buy the competitor out.
The major difference between Google and Groupon can be summed up easily, Groupon relies not just on marketing to attract its customer base but on comparrison to Google advertising – and as most people already have a negative view of Google advertising it then aids Groupon (and any others) to seem a better spend of a small companies ad $$$’s. Rick the example you give of the small restaurant is superb because the owner can see immediately and exactly what returns he gets for his advertising bucks. Also, although the costs may seem high the owner will know that the second tier of his marketing campaign, which costs him nothing to Groupon, will rely on his business’s quality of product and customer service, this is what small businesses have traditionally relied upon, and in your example has already proved a major advantage to the restraunteur as you have already began virally marketing his business for him by word-of-mouth, again something that small businesses traditionally relied upon.
Where Groupon do have a problem though is where the profit margin of product sold by the retailer is low, especially if the product is sold by many competing retailers at or near the same price level. Here the benefit to the Groupon advertiser may not return either in short/medium/long term any real benefits when cost is taken into account. Also note that it is likely that bad retailers, those providing low quality product and/or service will quickly see the benefit of Groupon advertising quickly diminish as the secondary marketing (word-of-mouth by customers) will not occur.
As far as Google market value goes it is unlikely that their shares will leap to anywhere near their previous high, for many investors are already aware that come tomorrow/next week/next month/next year Google will be challenged by an ever increasing number of competitors both large and small, for more and more of the advertising bucks available from small and medium sized businesses. Even if Google were to buy-out the successful competitors all it could possibly do at best is maintain its share of the advertising market but at the expense of capital. Of course if the competitors do not sell to Google, like Groupon didn’t, then this means that Google’s share of the market has necessarily declined in real terms.
Goldenon
Would anyone here explain what SME could get out of GROUPON? What individuals could get out of GROUPON? What customers, consumers,retailers,affiliates, small business owners could get out of GROUPON? Utilities & how best could it be utilized over Google please.
steve
groupon uses google to server its ads.
Gordon
There are a LOT of holes in the Groupon long term business model….here are just a few.
A LOT of businesses don’t like groupon because it trains consumers to follow deals and nothing else. If I go to your restaurant and have a $100 meal for $50 – am I going to be as happy to go back to your restaurant and actually spend the $100? For many the answer is no.
The merchant gets 25% of the value in the deal. $100 meal for $50? The merchant gets $25 – $12.50 a few weeks after the deal, and $12.50 a few MONTHS after the deal – not great for profit margins, and terrible for cash flow.
Because of the above reason, groupon is a VERY tough sell for retailers, unless they sell $100 items and sell $20 groupons.
Groupon doesn’t really lend itself to repeat business, which will kill it in the smaller areas. There are only so many spas, restaurants and unique offers in Akron, OH that can try a Groupon so often. How will those smaller areas continue to give cool deals to people? If you follow even the big cities, the quality of the offers is going downhill.
I’m not saying Groupon isn’t going to live long term, and it certainly has done cool things to the marketplace, but there are lots of problems in the long term business model.
anon
why do you keep approving comments from the bullshitwebsites commenter?
that website sets of AV alarms about a backdoor exploit.
Leonard Britt
I have seen Groupon Adsense blocks on some of my local city sites where the clicks are paying rather well (just need more traffic). I don’t know for sure if it is the Groupon ads generating those handsome payouts but the Adsense PPC on my Spanish sites where local advertiser participation is unlikely is much lower.
Asn5
Hello Rick…
I don’t disagree with the point you make; Groupon was a very innovative concept, and until Google comes up with a”results or you don’t pay” offering, Groupon will continue to dominate the space. Even so, Google is already testing a Groupon-like service that’s integrated into their”Places”. So maybe they can compete.
I think the reason Google didn’t meet”expectations” is due to capital investment. They hired like 2,000 people and they are looking to hire another 4,000. I say that because they just reported a net income of $2.3 billion, which is an increase of 18 percent compared to nearly $2 billion a year ago. And that was on revenues of nearly $8.6 billion, a 27% increase compared to the first quarter of 2010.
And oh yeah, last Friday they were approved by the Department of Justice for the 700 million-dollar acquisition of flight-data company ITA Software, which should also be a profitable integration.
Not sure how long before, or even if their current efforts will be reflected in the stock price, but I don’t think they’re going to be out of the picture anytime soon.
LS Morgan
Yes, yes, yes, we all know you have a chip on your shoulder about Google since they banned your account.
Here’s a protip, tho. Know why G has a hardon for Groupon (beyond just having cash to burn)? I’ll give you a hint… They were able to see exactly how much Groupon spent on adwords.
Rick Schwartz
LS, this is simple MATH. Wall Street invests on Income, growth and profits. They bet on the future. If you look at it objectively, 1 year ago Google had a clean field in front of them. Today the landscape is much different. They have competition and headwinds and that is impacting their stock and them as a company going forward. That is what I see and the evidence supports that conclusion.
Plus I discuss their stock price not doing well the day BEFORE it went down on Friday. Maybe others see a storm coming as well. It may not be over.
Directorise
Why to analyse this Groupon model in that deep? Rick speaks only about the principles for a new business model, not the cash flow…Even if you speak about that, what’s the point with Google’s?
Rick, i believe it will be very nice for everybody if you present some more examples of what you’re talking about.
twitter.com/TwitRestaurants
As a restaurateur who sold 4,500 Groupons and a part time web developer I can tell you Groupon has it’s place, but I would never replace my Google efforts with it. For one thing, nobody goes to the well twice. Your breakfast joint cannot give up 75% of a dining experience month in and month out and if they do they will train their clientele to only come in on the cheap. (Essentially the opposite of how you sell domains.) So where does he spend his $1,000 next month? PPC is the ONLY way to beat the SEO efforts of Yelp, OpenTable, etc. PPC introduces the brand to active, local restaurant searchers. Would I use Groupon one time at my next opening? Absolutely, and then I would run a local PPC campaign for life. Here is a recent NYTimes article on the Groupon debate: http://x.co/nytimes2
lee
I hope you were short Goog then Rick! ;)
Rick Schwartz
TwitRestaurants….let’s start out where we agree.
1. Grand Openings. That we agree on and is a no brainer.
2. We would run at least one campaign even at 75% off
So I see this as being wide as opposed to deep. That means EVERY store on Main St. can figure out some promotion to get new customers. Even if he uses it once a year or even two, when you include all businesses. So very wide.
But the key here is finding new customers that would otherwise not find you. When they come back each time you make the $$$.
I do agree you can’t do it too often because you don’t want to destroy your business.
I also see it useful for a”Flash Sale”
What if you have too much of something perishable?. You could run a campaign to sell those items while they are still fresh instead of being stuck with throwing them out.
twitter.com/TwitRestaurants
Hey Rick, I don’t disagree with anything and I love your blog for ALL business thoughts. Just noting it is not silver bullet and is (should) not to replace PPC, it is a different vehicle. One of us will sell a domain for $100,000 next month and one of us will serve 100,000 restaurant customers :-)
It takes at least a week or two to get in listed with Groupon, which shows their back-log. If you have too much perishable food, learn how to order. (no pigeon… excuses in restaurants either)
I see a real upside for the Group buying companies with small businesses who sell a service like yoga, advice and even some light home repair. Service for all business costs time, but the cost of a goods like eggs or steak is removed, which is huge.
@ Leonard Britt
Group buying companies have been great for Adsense and affiliate income. I have restaurant directories too. They have made the public un-afraid to hand over an email address if there is a chance to save. Focus on pay-per-lead email sign ups instead of sale percentage share. CrowdSavings and LivingSocial have great programs for this. On one site my affiliate sign up doubled my Adsense income the first month. I believe that people are signing up for more than one program, hoping that one great deal comes in the morning email. So smaller companies with email affiliate programs provide real opportunity. Groupon’s 110 million subscribers are 110MM less leads for you. Percentage share means your success is tied to the offering and if your subscriber lead buys it. Look at Rick, he bought one thing in a year.
Sri
One danger of coupon/deal/promo route is that you might get stuck with it for ever. An example of perpetual deal giving is godaddy! Just see how they are stuck at dotCOM registrations for a very low price. With discount coupons becoming commonplace, everyone searches for and does find some or other deal. So, godaddy has to keep on rolling out promo codes every few days, just to stay ahead of competition.
ScottM
I have a Groupon experience too with an Italian restaurant in the midwest. They are very popular anyway but decided to give Groupon a try. There Groupon offer was get $30 off a dinner by paying $15, so half off and the restaurant wisely knows the average tab for 2 people would be $60 or more. I got Groupon as a gift so I took 2 friends out for dinner and the tab was $90 with tip so it dropped to $60 with the Groupon coupon. The owner I know she said this was great for them because of course restaurants are charging 4X or more markup on the food, so even with $30 off they still made money, the waiter made money and the restaurant filled another table that night that might have been empty for a couple hours, an expiring commodity like a hotel room or airline seat. The gravy too is that just like with gift cards, about 25% of the people will lose the Groupon certificate or gift card, or forget about it until it expires, so that ends up being found money and pure profit for the restaurant since it was paid for ahead of time and are non-replaceable.
Tim
I am still a believer in Google.
After checking which links have been shared the most by Facebook users, and it turns out YouTube is #2 in the world behind Causes.com.
Also, interestingly two YouTube users are in the top 100 websites ranked by shared links.
Google.com, Google.it, etc are also among users’ favorites.