A study on Groupon.com

Groupon | Collective Buying & Social Marketing

content I. Groupon Profile • Background • Business Model and Operation • Additional Marketing Methods Tuán Gòu 团购 • API Collective buying Store mobbing II. Study the business model of Collective Buying • A Six Forces Analysis

GROUPON COMPANY PROFILE

Company Profile： • Established：10/08 • Industry：Advertising and Marketing • Employees：225 （from LinkedIn） • Operation： – Subscribers 4,400,000+ – Total Groupons bought 4,600,000+ • Media exposure： • Funding： Total $173M Angel, 1/07 Eric Lefkofsky Brad Keywell $1M Series A, 1/08 New Enterprise Associates $6.8M Series B, 12/09 Accel Partners New Enterprise Associates $30M Series C, 4/10 Digital Sky Technologies Battery Ventures Accel $135M Partners New Enterprise Associates

Business and Operation

Business Model：a form of Re-intermediation ③ gain stable sales, ① looking for good deals, increase awareness find/ share shopping experience Consumers suppliers/ retailers ② Sell groupons, charge commission • Groupon negotiate with suppliers/ retailers to offer deals； • Groupon promote deals and gather customers via its marketing channels； • Groupon sells coupons to customers and charge commission from suppliers.

A brief review Features： • Consumer pays before purchasing: ensure the deals get done；accelerate the cash flow • Large discount for collective buying in limited time and items：create a phenomenon of Bargaining& Panic Buying，encourage customer wowing the deals by word of mouth (via Social Web)； • One deal per day, consumer don’t need to make the choose； • Achieve a Three-Win

Product line（from official web site） ~ Consumer Packaged Goods ~ Electronics ~ Accessories ~ Entertainment ~ Automotive ~ Fashion ~ Beauty ~ Health & Pharmaceutical ~ Beer, Wine, and Spirits ~ Financial ~ Diet and Fitness ~ Travel The place of AD banner

Current sales：an analysis of 108 featured deals Sold Items Bought Groupons sold cost Categories Count % Mean Minimum Maximum Mean Minimum Maximum Restaurant & Cafe 39 36% 3609 1995 7207 16 4 35 Food 14 13% 4091 2078 9746 9 3 20 Salon , Makeup & SPA 13 12% 3350 2028 4724 44 22 99 Ticket 12 11% 3669 1962 14670 10 4 25 Fitness 8 7% 2982 2050 3995 36 5 55 Tour 7 6% 6686 2487 19872 18 10 30 Grocery 6 6% 5114 2679 9995 17 15 20 Lesson 5 5% 2409 1998 2600 34 20 69 Membership 3 3% 3814 2355 4913 37 30 40 Car Wash 1 1% 2358 2358 2358 5 5 5 Total 108 100% average sales= 3822 average cost= 21.76 Value Discount Mean Minimum Maximum Mean Minimum Maximum 33 10 75 53% 47% 60% 21 8 40 54% 50% 67% 220 45 805 61% 50% 88% 21 8 50 50% 45% 53% 136 15 480 62% 50% 95% 40 20 80 52% 42% 63% 37 30 40 55% 50% 63% 135 40 290 66% 50% 91% 93 75 110 61% 58% 64% 12 12 12 58% 58% 58% average value= 67.84 average discount= 56% • Main deals are services, such as restaurant & café, hair salon/ SPA, training. • Unit prices are low averaged $68，Groupon cost $22；discounts are high averaged 56% • Need no logistic distribution center

Business Model One deal per day High discount Time limit Buyers must exceed the floor level to get the deal open

Business Model Encourage virus- spreading via social application Facebook | Twitter Additional deals

A virus marketing– Leverage the influence with the social applications • Integrated with Facebook Connect; no bother to register • Location-based operation, every city has an independent twitter/ face book account, which is aimed to talk and communicate with customers • A $10 bonus for friend recommendation • Email subscription/ share of deals • RSS subscription of deals • API, open the deals information

Leverage the influence with the social applications • A two-degree networking relationship analysis of 100 randomly-chosen Twitter followers of Groupon L.A – 100 users generated 4000+relationship（including Follow、Mention & Reply） • Feature： – Leverage the marketing info/ influence – Do not to CONTORL but to INFLUENCE

Additional marketing methods • Company blog，to talk with customer / suppliers • Live Off/ Groupon Says，make the topics and earn eyeballs, encourage wowing • Make the service personal, let customer know the people behind the screen to increase the trust and intimacy（decrease the emotional distance & barrier）

Business Suggestion: let customer vote from whom want buy

Launch a rewards program • The currency, G’s, are awarded for viewing deals and buying deals. And if you buy a deal early (a minimum number of buyers have to go for a deal or else no one gets it), you get even more G’s.

Why Social Marketing? Those behaviors Key conversion happening on point Social web The main focus of traditional marketing The differences of traditional/ social marketing： • Traditional：focus on customer awareness, educating customer（product function, feature or brand image etc） • Social：focus on equal, transparent communication，let customer know the benefit of buying a specific product to make a smart purchase

Groupon recruitment • Expand its business development team in US market； • Web/ Internet product development, User experience

Operation Area  Cover 60+ cities in US  Subscribers 4,500,000+  Sales：  Groupon sold 4,500,000+

Web Traffic：Unique Visitors (compared with Newgg.com) Data source：

Demographics of web visitors Data source：

Open its deals（not function as a platform instead） http://www.groupon.com/pages/api API case – Android APP Widget Groupon makes its deals as a news media

Future Operation & Direction

Luxury product aimed at high-class consumers Put strict requirement for membership • The tax-income document needed

M&A: Mob.ly • Going mobile!!! • Mob.ly is a mobile application service The company, which works with clients to create mobile applications from top to bottom (from conception to design and testing), has built apps for clients like Comedy Central, NBC, Digg and Yahoo! • Mob.ly is led by former Yahoo! Senior Director of Product Management Mihir Shah and Yishai Lerner, former Director of Engineering at Carrier IQ.

A Review • Simple and clean profit model • Simple and satisfying shopping experience • Lower entry barrier • Not too many products • Consumers don’t have many options • Issues of after-sales and warranty

AN ANALYSIS OF COLLECTIVE-BUYING MODEL

A Five-force industry analysis The sixth force：manipulating the development and open of social web, leveraging the marketing efforts For New Entrants： • pioneer advantage （Brand awareness/scale economics） For Supplier： • Funding advantage • Large customer base, ability • Business developing ability to increase awareness • Supplier lack ability of For Customers： backward integration（do it • Lots of supplier themselves） resources • Get enough discount for appealing • Wide business operation For Competitors： For Substitutes： • Lower entry barrier（technology and capital) • How to compete by • The size and growth of industry differentiation

Groupon’s european competitor ：Groupola — a complete clone

Global collective buying websites: a phenomenon

Many Chinese copycats The 1st Goupon clone in China mainlad more than 50s The No.1 C2C in China

Deals Statistics: the latest 102 deals from Chinese Groupon-alike websites Category Items Orginal price Discount % Cost Saved Count % Mean Minimum Maximum Mean Minimum Maximum Mean Minimum Maximum Mean Minimum Maximum Restaurant, Pub & Cafe 26 25% 187 10 466 29.69 10.00 50.37 64 4 198 123 6 292 Hair salon/ Makeup/ 18 559 128 1876 20.87 4.69 45.38 96 10 188 463 100 1788 Massage 18% Cosmetics 17 17% 203 50 650 43.40 9.09 64.32 69 18 138 134 21 585 Membership/ Ticket 15 15% 592 25 5218 28.12 4.22 60.00 91 5 348 501 20 4998 Training/ Class 6 6% 368 50 600 18.25 10.82 30.00 66 15 120 302 35 480 Photography 5 5% 1048 108 3000 18.78 6.98 30.15 260 9 880 788 98 2120 Coupon 4 4% 94 20 300 29.54 3.33 54.81 9 3 15 85 10 290 Medical / Dental 4 576 426 879 35.84 15.70 49.60 186 138 248 391 228 741 examination 4% Flower/ Gift 3 3% 195 128 258 35.26 26.31 53.13 63 52 68 132 60 190 Appliances 1 1% 139 139 139 41.73 41.73 41.73 58 58 58 81 81 81 Designed Tee shirt 1 1% 178 178 178 16.29 16.29 16.29 29 29 29 149 149 149 Karaoke 1 1% 28 28 28 3.57 3.57 3.57 1 1 1 27 27 27 Wine 1 1% 398 398 398 34.92 34.92 34.92 139 139 139 259 259 259 Source: http://tuan123.net/pastTuan.php 04/28/2010 – 05/11/2010 • Main deals are Restaurant/ Pub & Café, Hair Salon/ Spa; Cosmetics; Tickets, accounting for 75% in total. • Cosmetics deals have highest average dicount.

The chart of Chinese Groupon-alike websites Lunched Existing Daily average Daily cost Website Groupon Sold Cost Saved Date Days Coupon Sold saved 美团 2010-3-4 69 29,962 434 69501.97 4,795,636 F团 2010-3-15 58 29,794 514 41533.53 2,408,945 满座 2010-1-6 126 29,421 234 15941.60 2,008,642 拉手 2010-3-18 55 19,207 349 31956.35 1,757,599 优享团 2010-1-23 109 18,553 170 7471.72 814,417 团宝 2010-3-26 47 15,297 325 74599.64 3,506,183 团美网 2010-3-23 50 12,436 249 18509.96 925,498 窝窝团 2010-3-14 59 10,850 184 60040.78 3,542,406 24券 2010-4-6 36 6,813 189 11790.00 424,440 爱帮团 2010-4-22 20 3,091 155 12013.90 240,278 来客团 2010-3-26 47 1,566 33 3529.94 165,907 爱爱团 2010-4-5 37 1,549 42 1346.81 49,832 赶团网 2010-4-14 28 1,024 37 1652.46 46,269 酷团网 2010-3-28 45 821 18 6041.87 271,884 17团团 2010-4-26 16 623 39 4011.56 64,185 千折百扣 2010-3-2 71 458 6 1465303.96 104,036,581 丁狗 2010-3-15 58 435 8 718.59 41,678 火团网 2010-4-10 32 284 9 465.81 14,906 粉皮儿团 2010-4-20 22 79 4 362.68 7,979 団客 2010-3-23 50 38 1 48.84 2,442 阿拉团购 2010-4-10 32 26 1 64.34 2,059 团拍 2010-3-4 69 0 0 0.00 0 围团 2010-4-16 26 0 0 0.00 0 Masa 2010-3-17 56 0 0 0.00 0 Maso Source: http://tuan123.net/history.php • Most website are new startup and have been operating less than 3 months; 04/12/2010 – 05/11/2010 • Daily sales are relatively small, general less than 500 coupon per day. • The operating areas are limited: Meituan.com 美团 only covers 3 cities so far: 北京、上海和武汉

Taiwan • Launched since 04/12/2010 • Operating in 台北，桃園，新竹，台中，台南和高雄 • Saved： NT$1,970,669 ， daily average NT$65,689 • 17P customers who purchased：4，802 daily average 160 persons To date 12/05/2010

Collectively Buying E-commerce platform Open source & commercial

A substitute —— Adidas www.freestripes.com

A substitute—— DELL Swarm

THANKS

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A study on Groupon.com

by Vinny Wu

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