What the Heck is a Groupon?? How the Fastest Growing Company in Internet History Just Made Coupon collecting Cool

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24th Nov, 2010

I hate those moments when you realise you don’t know everything about everything. Unless of course those moments involve a handsome, irresistibly well-dressed Parisian telling me about the historical significance of the bronze canons at the Place des Invalides as we drive by on his scooter– in which case, I’ll soak it all up like a sponge. Sorry, off-track.

But as you can imagine, it came as quite a shock when I– the girl who can spew key information on just about any successful lifestyle iPhone application currently on the market– was caught with my pants down at a dinner party the other night at the mention of Groupon.

How embarrassing. I’ve managed to surf the web for hours on a daily basis for the past year and completely miss the fastest-growing company in internet history, beating Ebay, Amazon.com, Yahoo, AOL and Google in the record books.

“How could you not have heard about Groupon?” says New Yorker and newly-recruited Goldman Sachs boy, as he scoffs down an amuse-bouche that I’m certain will give him bad breathe for the rest of the evening.

Note: I’ve identified my Groupon source as a Goldman Sachs boy not because I think it’s particularly cool to hang out with new generation bankers (in fact I would usually run for the hills, no offence Goldman Sachs Boy) but because it will later serve to emphasize the diversity of the average Groupon user in light of what the company represents.

If you don’t already know, by now you are probably quite annoyed by the fact that I still haven’t told you what Groupon (or a Groupon) actually is. Ok. So it shouldn’t come as a complete surprise when I first point out the obvious in that Groupon is a name that blends the words “group” and “coupon” together.

“Coupon? Très tacky,” says the peanut gallery. But before your facial expression turns sour and you click onto your next online destination, hear me out and have a little faith that MessyNessy doesn’t blog about saving 15 cents on frozen peas.

Traditionally, yes, the coupon is the currency of the lame and the pitiful (albeit the McDonald’s Monopoly coupons which are just joyous delights every time I happen to spontaneously march through those golden arches). But then why is a guy working for Goldman Sachs, a company dishing out one of the highest-paid salaries around right now, raving about a company that rhymes with ‘coupon’?

Fair enough, he could just be a tight-pocketed, coupon collecting, obsessive compulsive type. Except he’s not. And most likely, neither are all 17.5 million of Groupon’s subscribers in over 140 cities.

Groupon users are in fact savvy, young urbanites– a large majority being college-educated single females who go out two or more times a week.

They are avid users of social media who spread the word of business through blogs, Facebook and Twitter. Sound familiar? And there it is right there– the secret ingredient that just made coupon-collecting cool; digital social media once again changes the way business is done.

And now I’m ready to tell you what it is. First, Groupon negotiates huge potential discounts in your city on new or off-the-beaten-path places, cultural events, useful services, popular local goods etc, and posts the deals via the website or by email to its subscribers.

Using what they call ‘collective buying power’, the deal only becomes real or ‘live’ when a minimum number of people agree to buy the coupon– if you get the numbers, you get the bargain. Hence, the double entendre, get your Group-on!

Think undiscovered bars, concert tickets or spa days. These are deals to share with friends, a way to facilitate group outings over Facebook, Twitter, and other networks.

The idea eliminates the problem of your friends collectively rolling their eyes at you as you whip out that dog-eared coupon come bill-paying time– you can’t look cheap or compulsive if you’re all doing it.

And no need for the scissors to cut out coupons, the Groupon barcode comes straight through to your smart phone, naturally. Sound less cringe-worthy now? Having a quick browse through the website’s recent deals, I found a head-turning discount on the London page from £67 down to £19 per head at cabaret-concept dining hotspot, The Supper Club. Not bad at all! I loved that place but would love it even more at £19 per head. I also spotted cinema tickets for £1 and a spontaneous helicopter ride over Paris for 89 Euros on the French website. Discounts and fresh ideas.

For business owners, this is something to take notice of. Groupon presents a revolution in seriously effective advertising– so effective that it has proven too overwhelming for many small businesses.

The model works on the basis that vendors take a 50% cut of all deals sold through Groupon, which operates in nearly 30 countries. Although it might seem like a pretty big chunk of the profits, when you’re working with a company like Groupon that gets its offers in front of eyeballs by buying advertising space through Facebook and Google and via the word of mouth of its 17 million subscribers, to say your business will double, is more than an understatement.

With the power of Groupon’s social network connect, vendors are also accessing the largest, most desirable target audiences and one of the hardest to reach through traditional advertising.

Groupon now has thousands of companies clamoring to offer deals from museums to yoga centers to ice cream shops but prides itself in not taking on just any business and any deal to feature on the site. Candidates must already have strong recommendations from review sites such as Yelp and CitySearch and be offering a serious discount. Only one in eight applicants makes the cut.

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The fact is, within seconds of googling Groupon, I realised what a giant I had shamefully been out of the loop on. I expect the word will begin to creep into conversations in social situations more frequently as the concept gains speed in Europe where websites such as Gastro-discount booking service, TopTable, already has a massive following.

At just 17 months old this April, Groupon was valued at $1.35 billion. Forbes.com notes, “The only company to reach a $1 billion valuation faster was YouTube (now part of Google), founded in 2005 and still waiting to turn its first profit. Groupon broke into the black just seven months after inception.”

Now Google is said to be eyeing up Groupon for a rumoured sale price of $3+ billion.

So who is the Mark Zuckerberg behind this one?

Well, we’ve got 29-year-old Andrew Mason who majored in music at Northwestern University in Chicago– no Silicon Valley-bred geek.

He is a self-taught computer programmer that thought he was going to be a rock musician until around the age of 25.

“But it wasn’t about being a rock star; it was about being part of a counterculture,” says Mason. In short, the story goes that Andrew landed a coding gig after college at InnerWorkings. His boss caught wind of Mason’s entrepreneurial ideas and offered $1 million in seed money for a website called ThePoint that drew some attention from the press as an online platform proposing outrageous campaigns.

One such campaign involved raising millions of dollars toward solving Africa’s aids epidemic– on the condition that U2 lead singer, Bono would retire from public life (at the risk of losing readers that happen to be fans of U2, I must say that without knowing why, I also find Bono one of the most annoying individuals on the planet).

While the website didn’t attract enough visitors to generate substantial advertising revenue, the publicity helped gain $4.8 million in venture capital. Mason noticed that ThePoint’s most effective campaigns had been the ones that banded consumers together to gain buying power and he later began writing a blog that offered readers a daily deal from various local businesses. Investors encouraged him to pursue the strategy and Groupon (formerly Getyourgroupon.com) was born.

Ok I confess, a small part of me blogged about Groupon because I too want my friends to subscribe alongside me so that we can all start going to dinners and trying out-of-the-box weekend activities at truly rewarding prices. You don’t see any Google-powered advertisements running down the side of this post do you?

This is a non-profit blog you’re reading don’t forget and I have no shame in saying that I’ll take a coupon if I can get one– that is, a digital coupon from a social media website with a sleek interface that offers discounts on the fashionable, the unique and the chic, of course.

On another note, while I think I would be most charmed by a boy who took the initiative to plan a date through Groupon, there are some girls that might not yet be accustomed to the idea of waiting for the Groupon iPhone application to load the barcode during that already awkward bill-paying situation.

Perhaps not first date protocol unless you can be sure of a swift and suave execution– i.e. make sure your mobile network connection isn’t cause for embarrassment. But p.s. as I always say, it’s all about the confidence.

As social media continues to gain influence, our social behaviour is evolving slowly and steadily incurring big changes– right down to the rules of dating.

While an enthusiastic display of moderation on a first date ten years ago may have set off alarm bells for singletons (mentioning the word coupon, or anything sounding remotely similar would have been unthinkable), as we continue to move deeper into a digital age, the Groupon concept not only starts to be an acceptable method of payment, but also serves nicely as interesting conversation material.

See what I did there? I rolled MessyNessy dating advice and digital education all into one neat little blog.

-What People Are Saying About Groupon-

Groupon is the BEST thing that has happened to NYC since cupcakes and Carrie! I swear, I seriously plan my weekly outings by what special discounts you have to offer. – Angela S., New York City

Just one more example of how social networks will change our world. – @GiveOnePercent

Hi. My name is Nektaria and I’m addicted to Groupon. – Nektaria R, Yelp

If Groupon were a girl, I’d make out with her like 8th graders viewing the Titanic in 1997. – Taylor A., Atlanta.

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