Groupon has its share of skeptics as the firm’s stock hits the market, but the deals giant has had more marketing triumphs than setbacks.
A Google query yesterday for “Groupon’s public filing” resulted in the following Associated Press headline, appearing above the search page fold: “Groupon’s Fall to Earth Swifter Than Its Rise”. And here’s an example from NYTimes.com’s DealBook property: “Is Groupon’s Business Model Sustainable?” Other headlines like those also attempted to accent Groupon’s wild-and-bumpy ride to the NASDAQ trading floor, where the brand – just three years old – filed its initial public offering today.
In the last nine months alone, the Chicago-based company has had to apologize for a Super Bowl commercial, confront negative survey results from consumers and merchants, take criticism of its initial S-1 filing, and endure blogger rumblings that its business model is a Ponzi Scheme.
Whether Groupon can become the world’s premiere local marketing platform – which seems to be its quest – remains to be seen. The much-hyped company has inspired numerous competitors to enter the daily deals space, most notably Google, Amazon, American Express, and, for a short while, Facebook.
What’s already clear is that CEO Andrew Mason’s team is willing to invest in marketing its daily deals brand. According to Groupon’s public filings, it had 143 million worldwide subscribers at the end of September after spending $643 million on customer acquisition marketing during 2011’s first three quarters. The company is profitable in North America, while still working to get out of the red in other continents.
At press time on Friday, Groupon’s IPO appeared to be proving skeptics wrong. The company’s shares opened at $28, up 40 percent from its $20 IPO price.
So how did the young company grow up so quickly? Here is a timetable with some of the key marketing developments that have propelled the daily deals company to its IPO:
March 2009: Groupon enters Boston, its second market. From there, it was basically Manifest Destiny and beyond for a company that would quickly go nationwide with global acquisitions to follow.
May 2010: Deals firm starts to scale with Europe and Asia in its crosshairs. With five million U.S. subscribers, Groupon bought German clone CityDeals in a move that increased its overall user base by 17 percent while giving the company a significant footprint abroad. And according to a Business Insider expose, CityDeals’ management has since significantly impacted the course of Groupon. Seven months after the CityDeals purchase, Groupon continued its global march by buying four deals sites in Asia.
August 2010: Groupon runs national Gap campaign. There wasn’t a bigger tech news story on Aug. 19 last year. Fifteen million Groupon and Gap email subscribers got the chance to purchase a $50-for-$25 offer. Employing a bevy of social media tactics to support the email effort, the campaign grossed $11 million in one day, grabbing the attention of digital marketing and e-commerce wonks worldwide. American Apparel, FTD.com, and The Body Shop would follow with national deals in the next six months. For all examples, there have been persistent rumors that Groupon gave the retailers a huge chunk of the sales – covering the brands’ loss leads – in return for the opportunity to build its email list with the campaigns.
October 2010: Rice University brings sobriety to Groupon’s party.While there had been anecdotal reports that daily deals actually hurt local merchants, a study from Rice University seemed to give those concerns more weight. Surveying 150 businesses in 19 cities, the Houston-based institution found that Groupon promotions were unprofitable for 32 percent of the merchants and more than 40 percent indicated they would not run a comparable promotion again.
Fall 2010: Events marketers look to Groupon to put butts in seats. Of all the types of businesses where offering a discount makes sense, events seem among the most logical. It’s simple – get people into the ballgame, concert, movie house, etc. and let them pay you back at the concessions stand. Last fall, college and professional sports teams in particular began leveraging Groupon to do just that. The company has even inspired a niche-focused copy cat called Crowd Seats, which just entered the New York/New Jersey market with discounted tickets for the Rutgers vs. Army game next Saturday at Yankee Stadium.
January 2011: LivingSocial and Amazon show competitive muscle. Underscoring how the daily deals space was evolving into a competitive melee, LivingSocial and one of its chief investors, Amazon, ran an offer for the e-retail brand that sold 1.2 million $20-for-$10 vouchers, defeating the Groupon-Gap effort that took place exactly six months earlier. It’s reasonable to look at this event as a precursor to Amazon itself jumping into the daily deals space, which it did three months ago.
February 2011: Tibet Joke in Super Bowl ad backfires. Humorous ad copy has helped Groupon build its brand. But people felt the company went too far with its first-ever Super Bowl ad earlier this year, creating a social media backlash that eventually led to a public apology from CEO Andrew Mason. An irreverent joke about Tibet in the ad touched a nerve with the masses and seemed to set off a string of events where all of a sudden once-hot Groupon couldn’t catch a break.
May 2011: Google Offers poses serious threat. Five months after Groupon turned down Google’s $6 billion buyout offer, Google Offers was announced in limited markets. The Google Offers platform immediately connected its deals to Google Wallet and the Google Shopper mobile app. From the mobile competitive perspective, Google’s move came two weeks after Groupon launched its GPS-enabled Groupon Now app. Indeed, Google came out with its guns blazing, with fancy mobile features similar to the ones that had taken Groupon two-and-a-half years to develop.
A Portland, OR merchant that ran the first Google Offer gave a very promising review. What’s more, Google has shown it isn’t afraid to leverage its highly trafficked homepage as an ad placement to attract Google Offers subscribers. And it might also have a more sophisticated deals personalization system when compared to Groupon. All in all, Google’s message to Groupon appears to be, “It’s on.”
August 2011: Facebook Deals closes up shop. The social media giant abruptly and somewhat surprisingly killed off its deals platform only four months after launching it. With Facebook out of the picture, Groupon had one less major digital brand to compete against.
Summer/Fall 2011: Groupon expands what its deals can be. Two months after the launch of a vacation packages product, Groupon Getaways, the company followed with another new line of business – direct e-commerce – in September. Focusing on electronics offers from manufacturers and retailers, the initiative, dubbed Groupon Goods, rolled out nationally in the U.S. after a successful run in the U.K. Each of the handful of products is being offered by a different merchant or manufacturer that handles order fulfillment.
October 2011: New merchant survey suggests ugly news. If you were a Groupon exec reading iContact’s recent report, you might have reactively uttered the famous line, “lies, damned lies, and statistics.” Surveying 1,000 small merchants, 70 percent said they hated Groupon. When compared against Facebook, Twitter, and other social media channels, Groupon was the most disliked in every major category, said the research from iContact, an email services provider. The late October survey was one of many jabs that researchers and analysts have taken at Groupon since its controversial Super Bowl commercial.
Advice for Groupon going forward: a human touch matters. For the last development on the timeline, Clay Mallow, co-owner of Dram Shop, a burger joint in Brooklyn, NY, seemed to have advice for Groupon on how it can fix up its merchant relationships. He’s run two Groupons this year, as well a Scoutmob offer. Mallow said if his establishment runs another digital discount, he’s going with Scoutmob and not Groupon because the former sent a sales rep in person while the latter has been phoning him from Chicago. Indeed, even for digital local marketing, a personal touch still counts for something.
“Working with Scoutmob was more pleasant than working with Groupon,” Mallow said. “Working with Groupon was just about the numbers. Scoutmob was a little more personal.”
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