via @forbes

MySpace Moment, sooner or later, is going to enter the Merriam-Webster’s Collegiate Dictionary alongside crowdsourcing, bromance and cougars. It is a fact that once seemingly invincible brands can inexplicably decline in popularity so let’s give this depressing phenomena a name so we can say, oh, I don’t know, Groupon may be nearing a MySpace Moment.

Which it may be.

Something is amiss: The Securities and Exchange Commission frowned upon – and legions of accountants mocked – its Adjusted Consolidated Segment Operating Income metric in its first filing. It inflated the company’s worth by ignoring marketing costs. Groupon subsequently amended its filling.

It posted a net loss in the second quarter (although much of that was related to the hiring of more than 1,000 employees).

Now Experian Hitwise is reporting a significant drop-off in Groupon traffic this summer, nearly 50% since its peak in the second week of June 2011 compared to last week.

During the same time, Living Social has achieved 27% growth in visits to its site.

These are just two data points, of course, and they ignore the formidable assets that Groupon does have – namely its email mailing list, which CEO Andrew Mason pointed out in a recent internal memo to employees (the only way the company has to defend itself now that it is in a quiet period) and head start in this market and name recognition.

It has also been pushing into real time mobile offerings with Groupon Now.

And it’s not that other sites don’t dip in traffic every now and then – or even fail to turn lagging initiatives around. Remember Google’s social media efforts pre-Google+?

Or eBay’s diversification away from the auction model

Are Daily Deals Sustainable?

In fact eBay is a good company to point to right now. Ten-fifteen years ago, it was auction-everything thanks to eBay’s wild popularity at the time. To be sure, there is still a market for that business style but as eBay itself has shown with its emphasis on fixed-pricing, it is better to diversity into other categories as well.

So may it be with the daily deal model. Doubts are growing whether its current form is sustainable – by that I mean, will there be enough consumers to fuel the 400 plus daily deal offerings in the long run? Or merchants, for that matter?

One point made by Experian Hitwise that does not bode well for Groupon or the model is that overall visits to a custom category of Daily Deal & Aggregator sites were down 25% for the same time period.

Also, it noted PriceGrabber released results from its Local Deals Survey in June, stating that 44% of respondents said they use or search daily deal Websites. “However, 52% expressed feeling overwhelmed by the number of bargain-boasting emails they receive on a daily basis.”

"Alright, you caught us. We're actually not making any money. In fact, we are really losing a lot of money."

This is the essence of Groupon's declaration last week that it will remove the controversial accounting metric calledAdjusted Consolidated Segment Operating Income (ACSOI) from its financial statements. ACSOI essentially measures Groupon's profits before subtracting its subscriber-acquisition costs and stock option-based compensation. The metric was an attempt to put a thin veneer of respectability on what are extremely disconcerting profitability numbers for the company. In the first quarter of 2011, Groupon posted a net loss of $113.9 million. Yet, the company reported ASCOI of positive $80.1 million. In most recent quarter, Groupon's losses continued to mount as it begrudgingly abandoned the ACSOI metric amidst criticism and incredulity from the SEC.

But what is most interesting about its emphasis on the ACSOI metric is that, deep down, Groupon knows what we all know: good investments are profitable investments. It was simply not enough for the firm to report earnings and explain that it was investing for growth. Rather, Groupon felt the need to include a metric of profitability, no matter how contrived, that was actually positive.

Clayton Christensen would agree with the intuition that Groupon displays but ignores: businesses should become profitable before they become big. The best way to manage a fledgling business is for managers to be impatient for profit but patient for growth. Such a strategy limits an early venture's funding in order to force the business to develop a profitable business model and then invests heavily in growth once such a model is identified — Christensen terms such investments"good money" for incubating growth businesses and extols the strategy for three reasons.

• First, when a business is impatient for profit, managers are forced to validate their assumptions and demonstrate that customers are fundamentally willing to pay an acceptable price for the company's offering.
• Secondly, expecting a business to be profitable quickly forces it to keep its fixed costs low. Because a business's cost structure determines which customers it finds profitable, keeping these fixed costs low preserves strategic options for the company when it is choosing which customers to target.
• Finally, reaching profitability quickly ensures that when outside financing dries up, the venture can succeed on its own.

Groupon's fundamental problem is that it has not yet discovered a viable business model.The company asserts that it will be profitable once it reaches scale but there is little reason to believe this. The financial results of Groupon's traditional business continue to deteriorate, especially in mature markets, and new ventures such as Groupon Now also have failed to drive profits. And unlike the very few successful companies that scaled before they were profitable (think Facebook or Amazon), Groupon's business model does not benefit from significant network effects. The company's product is not more valuable to users as more people adopt the platform. If anything, the fact that Groupon is witnessing decreasing revenue per merchant and fewer Groupon purchases per subscriber in its maturing markets suggests that growth may actually decrease Groupon's value to its customers. Yet, Groupon maintains a blind faith that growth will be its salvation. As Pets.com learned in the last bubble, such a strategy works just fine until you run out of other people's money to spend on growth.

The real cause of Groupon's problem is that it had too much of a good thing. With over $1 billion of venture capital money to invest in growth, what manager has time to worry about profitability? Groupon's "bad money" — investments that were patient for profit but impatient for growth — did not instill the discipline needed to enable the company to emerge as a successful standalone venture. Now, the venture capital markets cannot supply more capital and the company must depend on the IPO market to finance its money-losing operations. Eventually, investors will be unable to sell their shares to a greater fool and Groupon will be added to the list of companies that had immense potential but died because they did not find a successful profit formula in time.

The story would be much different if Groupon did not have nearly unlimited access to funding so early in its corporate life. A successful financing strategy would have provided Groupon with incremental investments to enable the development of a profitable business model around a product that had obvious appeal to customers and merchants. In such a world, Groupon would have stuck to its home market of Chicago until it developed a business model that was profitable at scale in one market. Armed with a viable profit formula, Groupon could have scaled aggressively — confident that much larger profits awaited it.

But it is now too late. Groupon needs another $750 million to keep the lights on and to keep growing while it prays for profitability that will perpetually lay just one funding round away. Groupon's venture investors and executives need a way to cash out before everyone realizes that the emperor has no clothes. I will probably buy a Groupon every now and again — I have no problem letting investors finance my cheap consumption. But as far as an investment goes, Groupon is looking about as profitable as giving away your merchandise for 90% off.

I think we all saw this coming...

While the daily deals space is increasingly crowded, Groupon and LivingSocial are "Gorillas among ants," says comScore.

As you can see in today's chart the gap between Groupon and LivingSocial and the rest of the deals sites is huge. (This is uniques visiting each site on a monthly basis. Deals are a mobile phenomenon, so this is mostly a directional indicator.)

According to comScore these top two players account for 90% of the visits to daily deals sites.

It's good for Groupon and LivingSocial, but over time a bunch of "ants" can become problematic. As the "ants" get more and more daily deals for themselves, it will affect Groupon and LivingSocial.

That's why both companies are shifting to a real time model offering multiple deals in a limited time frame. That's a much more difficult model emulate.

Read more: 

There are now officially one billion "Groupon" clones, including one I am advising.  I hear all the time, "The concept is so simple, the barrier to entry looks so low".  This could not be more wrong...

As is the case with many businesses, scale is the key to winning and dominating the category.  While I still believe LivingSocial is well positioned to be the long term winner (I know, most think I am crazy but I have my reasons), Groupon is scaling quickly.

I ran a Groupon recently for a company I advise to experience it myself.  The sales person was efficient and smart, the process strightforward and the Groupon sold out in less than 36 hours.

Want to know the barrier to entry in the deal space?  Bill Gross hit it on the head...

Groupon, as everyone knows by now, is growing like crazy. How crazy? CEO Andrew Mason just revealed at the D9 technology conference that he now employs 8,000 people, which is up from 1,500 a year ago. That means it grew headcount by 433 percent.

About half of its employees are sales people. Signing up local businesses to offer group discounts requires a lot of hand-holding and sales calls across many local markets. Groupon is now in 46 countries.

Groupon is a selling machine, so it needs a lot of sales people. But these aren’t door-to-door salesmen. The only way Groupon can scale this sales organization is through centralized call centers with different teams focussed on different markets. (Yelp does the same thing).

And you thought it was all about Groupon’s comedians-turned-copywriters and the “Groupon Voice.” (The company employs a lot of copywriters also, but they don’t have thousands of them). It’s a sales culture through and through. Facebook or Google would be bragging about how many engineers they have. Groupon crows about sales.

via @techcrunch

By Dawn Kawamoto

See full article from DailyFinance:http://srph.it/lTBss2

A penny saved, they say, is a penny earned -- which certainly explains the popularity of group-buying websites. But they also say that time is money, which is why you may be feeling as if the daily slog through your inbox's growing list of discount deals is becoming more trouble than it's worth.

The temptation to sign up for "just one more" deal site is likely to become even greater with a host of new competitors coming online soon, featuring an ever-widening range of merchants offering deep discounts in hopes of winning repeat business. Savvy consumers, however, can save both time and money by approaching group buying with a laser focus on the deals they're most likely to be interested in, rather than snapping up goods and services just because the deals look like bargains.

And more options are becoming available for weeding out the deals you want from the deals you don't, say industry players.Aggregation sites are increasingly popping up, and niche group-buying sites are forming rapidly.

Sites to Suit Your Specific Needs

Niche group-buying sites serve a dual role for online publications and websites, allowing them to leverage their existing readership bases and advertising relationships -- for example,ParentsDeals, which was created by the publisher of Parents and American Babymagazines and is hosted on the Parents.com site. Other niche sites are being formed to serve particular clientele and distinguish themselves from broad-based players like Groupon and LivingSocial, say industry players.

Environmentally conscious shoppers can pick from among such eco-friendly niche sites asGreenDeals operated by Green America, or standalone green site ethicalDeal.Green Box Topoffers deals designed for those interested in eating organic and locally grown foods, which likely draws a different crowd thanOmaha Steaks' overstocks daily deal.

And the list of niches sites goes on, among them:

• Spa Sites:SpaRahRahrun by spa information site SpaFinder;TheRightDeal operated by spa information site SpaWeek; andDaily Dealsrun by spa and hotel listing site SpaandTravel.com.

• Luxury Sites:Gilt Groupe, a standalone site that focuses on fashion, home furnishings and travel;Ideeli, a standalone site for fashion, home and beauty; andOne Kings Lane, a standalone site for home furnishings.

• Family Sites:Sweet Dealsrun by mom's site Mamapedia;Plum District, operated as a standalone daily deals site for moms.

• Jewish Sites:JDeal, which offers such deals on kosher foods and restaurants;KosherKouponz, which offers discounts on Judaica items from kiddush cups to etrog boxes; andJewpon, which sets itself apart with a bilingual English/Hebrew website.

Reduce Aggravation with Aggregation

Deal aggregation sites like Yipit and The Deal Map provide consumers with another alternative for reducing the daily deal deluge to areas of specific areas of interest and location. Both companies pull their daily deals from hundreds of websites, from niche players like Green Box Top to industry titans Groupon and LivingSocial.

The Deal Map, for example, has 12 categories that range from health and beauty to home and garden to medical, for example. Yipit slices it even thinner, allowing consumers to pick their interests from among 51 categories such as pets, bridal, skydiving or kids. Personalize your profile, and the aggregator sends you only daily deals that fit your interests.

Based on category selections made by Yipit's users, here's how its top 10 categories shaped up:

"We'll add more categories if it makes it easier for users," says Jim Moran, Yipit co-founder, noting that as more businesses try marketing themselves on group-buying sites, a wider range of categories may be needed. "We now have air conditioning repair companies offering daily deals."

Back in February 2010, Yipit worked with 20 daily deal companies and offered a couple hundred deals a month. Now, it aggregates more than 500 deal sites, and offers about 20,000 deals per month, says Moran.

Location, Location, Location

The Deal Map sources its deals from over 400 sites: small businesses, national retailers, and group buying heavyweights like Groupon, says Dan Visnick, the company's vice president of marketing.

"People want more relevant deals and want to select from the categories they're interested in," says Visnick. Location is a key filtering criterion as well: 50% of Deal Map's users have taken advantage of the company's mobile app to find deals in close proximity to their mobile device.

But after selecting location as that first slice toward personalizing daily deals picks, consumers will often select more than one category to draw from for their daily deals, Visnick says.

Visnick's gut estimate is that, a year or so ago, 85% of the daily deals came from general deal sites like Groupon and LivingSocial, but that the dramatic rise in niche sites has lowered that market share to around 65% today.

Groupon, LivingSocial Still Rule the Roost

Recognizing the trend, Groupon and LivingSocial are moving to take their broad reach into the niche arena. Earlier this month, Groupon teamed up with Live Nation Entertainment toform a joint-venture to offer deals on live events like concerts, theatrical performances and sports under GrouponLive.

LivingSocial is also forming some categories: It kicked off its Family Edition in November, and debuted its Escapes site for quick, nearby excursions following its acquisition of Urban Escapes last fall.

For now, LivingSocial plans to focus on its existing product offerings, rather than creating a number of new categories, says Maire Griffin, a LivingSocial spokeswoman. She notes that despite the onslaught of niche sites, LivingSocial and Groupon continue to hold about 90% of the group buying market. And both companies' efforts to expand their geographic reach internationally and domestically are keeping them hopping.

Although the number of players in the group buying industry has exploded over the past year with more niche players and aggregators, Forrester Research analyst Sucharita Mulpuru doesn't see any immediate danger for the big sites.

"Most people find out about deals by getting emails from companies like Groupon directly. That's not going to be displaced by aggregators," Mulpuru says.

Posted May 12, 2011 9:00am by Megan O'Neil 

But no-one wants to pay full price for things that we think we can get at a discount. With a seemingly limitless supply of digital coupons and deals now available on your mobile device, you don’t have to. We have assembled the very best list of coupon-related smartphone apps for the iPhone, Android phones and BlackBerries that will keep your phone in your hand, and your money in your pocket.

Tap into deals with the iPhone

Groupon (free) is designed not only to connect you with discount products and experiences, but also to share with friends and family. You can buy a deal yourself – like a $19 whitewater rafting trip – and then refer it to someone else, or you can buy it directly for someone else as a gift. When you refer an item to a friend, you can earn Groupon dollars, saving yourself even more money. And when you go to use your coupons, you don’t have to print anything off. Just carry your iPhone with you.

Similarly, the free LivingSocial app uses location-based software to create a list of discounts and deals in your area that are then emailed to you. But this app has an additional feature that is designed specifically to connect you with great – and discounted – vacations. For example, I came across a package for a two-night stay at a winery in Napa, breakfast included, for $300 bucks.

Coupon Sherpa (free) is the app to have for those who shop by habit. That’s because the app allows you to shop for coupons and discounts by store, and by product category. So if you are heading to Target anyway, open up the Coupon Sherpa and see if any of your favorite items are on sale. It is always fun to save money, even if it’s only $5 off some kitty litter.

The free MobiQpons app is lighter on the exotic vacations, and heavier on deals for the local drugstore. It is probably best used when you are heading out for some local errands and need an oil change – $5 off at Jiffy Lube – or an ice cream - $3 off any cake at Baskin Robbins. Deals can also be searched for by store and by category, and there is something for everyone. One additional cool feature is a savings tab: it tallies up exactly how many coupon dollars you have logged.

Checking multiple coupon apps for the best deals can get a little time consuming. For those who are eager to get straight to the point, there are a couple of handy discount aggregators. The Daily Shopper app (free) allows you to construct a list of stores that you want to see coupons from. If, for example, you get all of your children’s toys from WalMart, you can sign up for notifications from that store alone. Similarly, the free iDealyzer Pro app pulls deals and coupons from discount sites such as Woot! and Groupon so you can review them all in one spot.

Fascinating article from the Wall St. Journal about the changing shopping behaviors of affluent consumers.  Similar patterns that occur in the mass market are appearing in the affluent... coupon use, sale sensitivity, trading down, buying less and reduced brand awareness.  This trend is significant for many retailers and, interestingly, also for the deal guys (Groupon, Living Social et al).

Signs of this are already showing up with the new found emphasis on travel deals, high end spa packages and the success of sites like Gilt.

Now please excuse me while I throw on my Gucci sandals and run my Bentley over the the car wash... I have a  coupon!

<br />Via: Online MBA

AT&T Launching A Groupon Clone -- Why It Actually Makes Sense

AT&T Inc. (T), aiming to tap the billion- dollar market for online coupons dominated by Groupon Inc., will introduce its own discount site in about a month in Los Angeles, Atlanta and Dallas-Fort Worth.

The site, on its yellowpages.com subsidiary, is sweetening the deal for consumers who register with a $10 credit beginning today, said Dawn Benton, an AT&T spokeswoman.

AT&T, the second-largest U.S. wireless carrier, will have to compete in the market against Groupon and a growing number of new entrants, including Facebook Inc. and New York Times Co. (NYT) Facebook, the social networking site with more than 500 million users, last month said it is trialing a daily coupon site in five U.S. cities.

The U.S. daily deals market, with discounts of as much as 90 percent at restaurants, clothing stores and nail salons, will grow to $3.93 billion in 2015, from $1.25 billion this year, according to a projection from BIA/Kelsey in March. Under the most favorable conditions, sales could reach as much as $6.1 billion, the Chantilly, Virginia-based consulting firm said.

AT&T plans to roll out the daily deal site to other cities and offer it on mobile devices, said Benton. She declined to say which businesses may be part of the initial trial.

Market leader Groupon, based in Chicago, is planning an initial public offering later this year that would value the company at between $15 billion and $25 billion, two people familiar with the plans said last month.

In a bid to stand out from the growing crowd of daily deal competitors, which include LivingSocial.com, the website also recently introduced a new service called Groupon Now that presents users with bargains based on their location.

Dallas-based AT&T rose 9 cents to $31.21 at 4 p.m. in New York Stock Exchange composite trading. The shares have gained 6.2 percent this year.

To contact the reporter on this story: Greg Bensinger in New York at gbensinger1@bloomberg.net