Why root for Groupon?
Disclosure: I’m still a Groupon shareholder, but am otherwise uninvolved with the company. I don’t follow it super closely and don’t really know what they’re doing but I saw Rich Williams (the new CEO)’s blog post and impulsively decided to add my take. No one at Groupon knows I’m writing this.
It’s now been two and half years since I left (“left”) Groupon. A new CEO just came in, which is typically used as an opportunity for the world to take a fresh look.
After the are-you-living-on-a-different-planet nonsense in Groupon’s last earnings release, and the stock’s plunge to Andrew Mason-level terribleness, I remember telling my wife at dinner that night that I was having a hard time feeling any pride in the company I’d founded. Her response was, basically, to call me a moron — to point out that 50 million people use Groupon, that she overhears 1 or 2 people talking about using Groupons every week, and that it’s mostly in the circles I frequent that people are down on Groupon.
When Yahoo got a new CEO, when Microsoft got a new CEO, people felt hope. Because even when those companies aren’t doing well, we still want them to succeed. A strong Yahoo and Microsoft create healthy competition, and that’s good for everyone. Now Groupon has a new CEO, but there is no such feeling of hope. I think that’s because, generously, we don’t care if Groupon succeeds. And for many, it’d be more accurate to say that they’d like Groupon to fail.
At the time, Groupon was the fastest growing company in history. How did we do it? By inventing a brilliant algorithm? By curing cancer? No — by sending people a daily email with stuff for half-off. If I was working my ass off to build a tech startup and I saw that come along and get huge, I’d be like, fuck that. It’s the tech startup equivalent of camping in an undetectable corner in an FPS and sniping people — it feels like cheating. Where’s the cool tech? Coupons? Email? This is not the future I was promised. If it smelled weird from the outset, it got worse when stories started coming out that Groupon could be bad for the businesses.
I’m saying all this to setup the question in the title of this post: Why root for Groupon? Why should you hope it succeeds?
My current company, Detour, is for all intents and purposes at its current stage, a small local business. We sell walking tours of San Francisco. To be successful, we have to do the exact same things other local travel companies do. My experience here has reinforced the truth at the root of Groupon’s success: if you have a small business, it’s hard to reach customers. If you can afford it, you can advertise in the paper or at a bus stop. If you have a good location, you can get some free foot traffic. If you have the technical know how and a decent website, you can run ads on Facebook or Adwords.
Most small businesses don’t have those things. Groupon came along, and it was a way to get customers in the door — thousands of customers— without paying anything until they showed up and spent money. In the same way Adwords and pay per click model helped change digital advertising, Groupon’s pay per customer model helped change local advertising. And by running one deal a day, it was novel and exciting for customers — an awesome way to discover new things, and an excuse to get out of the house.
The replicability of the model led to thousands of clones and ultimately led me to move Groupon toward the current multi-deal marketplace model, which meant a lower volume of customers per merchant and thus lower margins for Groupon. But the core value proposition remained. As an aside, I often find myself wishing that the original deal-a-day version of Groupon was around today; looking at the other paid options available to me as a small local business owner, I can’t imagine a lower risk, more cost effective, or higher impact way than having Groupon send a one-time offer to 500k people in the Bay Area about Detour, with a few thousand of them buying it for half off.
Yes, it is possible to use Groupon in a way that’s bad for your business. Groupon is powerful like morphine is powerful. If you use it too much, you’ll overdose and die. But take it in moderation and it can do wonders. Groupon is a big company, and as these things go, it has a responsibility to help save its advertisers from themselves and stop them from OD-ing. There’s more they can and should do. There’s more I should have done. But that should not take away from the fact that, when used correctly, Groupon is a truly wonderful drug that has helped make dreams come true for many small business owners, and brought experiences within reach for consumers that they wouldn’t have otherwise had. I think we should want Groupon to figure out how to make that work.
Why am I writing this? Even though I have no relationship with the company anymore, I’m still a shareholder, and I’m still somewhat responsible for its existence on earth, so of course I want it to do well. And because of my distance from the company, I can speak with a plainness that’s more difficult for those on the inside. Not to imply they agree with any of this. Since my departure, I’ve watched CEOs like Elon Musk voraciously and successfully defend their companies against criticism, and contrasted that against my own style of letting the haters hate and writing it off as temporary noise, and realized that the choice had served Groupon poorly. So I’m trying to make up for that.
I like Rich a lot, but this post isn’t really a comment on him one way or another. I don’t know whether he will fix Groupon’s problems. But I hope he does. And I hope you hope so too.
