What exactly is the deal with daily deals lately? A year ago it felt like it was hard not to be impressed with how huge Groupon, the biggest ‘deal of the day’ service, was becoming and how strong their word-of-mouth reputation had become. Everyone and their hip online friends were raving about Groupon, and if you weren’t buying your foie gras sushi at the same time as 200 others in your city for half-off, you clearly didn’t know how to eat right. The combination of “act-now” urgency, flashmob approach, and an attitude of cool made Groupon the fastest growing company ever. Yes, EVER. That’s some pretty hard buzz to beat.
But now as Groupon approaches its third year of operation, things are getting more serious for the company and its initial public offering. And a quick look around popular business or social media blogs shows that the current reputation isn’t quite as flattering. There has been some considerable turbulence in the Groupon camp concerning the reporting of its finances.
But while it might be easy to hate on the most popular daily deals service, all hope has been far from lost. In fact, the future for Groupon is promising if they use their commanding market share to their advantage. This buzz will change its tone if Groupon can prove they are the best choice for daily deal above all competition. But they still have their work cut out for them.
No Such Thing as Bad Publicity?
As the deals site filed to launch their IPO in June, bloggers and mainstream media began to take more than a few swings at Groupon. They were harshly criticized for using a controversial figure in reporting their earnings. Other analysts advised to steer clear of their IPO, arguing that the company was making up for quarterly losses by paying off old investors with funds from new investors, essentially operating like a ponzi scheme (yes, their exact words) with no working business model. Perhaps this, along with a leaked eccentric memo from founder Andrew Mason lashing back at these very critics, contributed to the departure of Groupon’s PR boss after being with the company about two months. And, as many of the brands taking part in Groupon deals have noted, some of the daily deals themselves just aren’t working. It comes with little surprise that the media is abuzz with the most recent news that Groupon is having serious second thoughts about going public at this time. Everyone is paying particularly close attention as Groupon joins a slew of tech companies filing for IPO, including Zynga and LinkedIn. But at least all of this press drives the attention back to Groupon.
Winner Has to Take All
And that’s the key, because it’s not time to call it game over just yet. The daily deals business can work, and it is still Groupon’s business to lose. While Google’s competitor service, Google Offers, continues to go strong, they still don’t have anywhere near the market share of Groupon right now. The major issue at the consumer level for all is an over-saturation of the deals themselves. This means competitors, including Groupon’s closest adversary Living Social, only add to over exhaustion. Facebook Deals has recently pulled out themselves. The post-honeymoon period might be good for Groupon, so long as they take advantage of their big reach to create the most inventive and relevant deals. The controversy will subside if the business itself pulls through. Let’s not forget that Google themselves also faced an onslaught of criticism in 2004 as they planned to go public. Most likely, the daily deals game will have to come down to a winner takes all situation. Can Groupon win it by holding on to their giant share of the pie? Was it all too much too fast? Stay tuned…