Groupon has already conquered the daily deals market--now they're trying to take over all other deals, too. But they may be missing one big piece of the puzzle: a social network. The Chicago-based discount startup just launched Groupon Now, a service that offers nearby deals on-the-go. Hungry on the way to work? Open up the Groupon app, which might suggest discounts on a burrito--along with other options for food, fitness, entertainment, and nightlife--all in a several block radius.
Groupon Now is sure to impress users--after all, the service is currently composed of $1 deals on everything from concerts to yoga classes. But for merchants--the intended beneficiaries of the service--Groupon Now is missing a huge component: a social network.
Competitors in the deals space already offer similar features as Groupon Now, but with a social layer built on top. Launch up Foursquare, for example, and you can find any number of nearby rewards and deals. The same goes for Facebook. But using these deals is an inherently social process, and will more often than not correspond with a check-in or status update.
In other words, deals on Facebook and Foursquare are more likely to be shared, turning a routine discount on coffee into an advertisement for a local merchant that flutters out into one's social network and brings in more potential business. On Groupon, the butterfly effect is not present--it's a personal purchasing decision that looks to go unshared. Groupon's ad for the service perfectly captures what we're talking about: A consumer walking alone down the street checks out a deal. No big groups of friends filling up the burger joint's seats--just a one-on-one interaction between consumer and merchant.
Groupon has managed to get by so far without a social network: The steep discounts and nature of their group deals were enough incentive for the service to spread to friends by word of mouth. But Groupon Now, which is made up of deals you have to jump on immediately, loses that edge--users won't have time to get their friends involved for spur-of-the-moment purchases.
Solution? Groupon needs to push out more social features for the service to be worthwhile for merchants.
Or, heck, the company could use some of its nearly $1 billion funding to purchase Foursquare or GroupMe. Looks like we aren't alone in thinking like this.
COMMENTARY: Groupon is reportedly in partnership talks with location-based leader Foursquare.
Writes All Things D, citing multiple sources,
"The arrangement is likely to see Groupon deals targeted to Foursquare users' check-ins. Mobile app users who tell their friends that they're in the vicinity of a venue offering a discount are obviously prime customers."
Only last week, Groupon announced a deal to distribute its new Groupon Now real-time offers with Foursquare competitor Loopt. Loopt users now receive alerts when they're close to a local deal, without even opening the app.
Comments ReadWriteWeb,
"The move fits in well with Groupon modus operandi -- they are known move fast and be extremely aggressive to stay ahead of the competition. With all of the Groupon clones and competitors lining up in the daily deals market, Groupon has to try and stay a step ahead."
According to Mashable,
"Groupon Now is so vital to the company that internally it's known as Groupon 2.0. That's why we're not surprised to hear Groupon is in talks with Foursquare to integrate daily deals into Foursquare's app. It's a smart idea where everyone wins."
According to Business Insider,
"Foursquare gets a partner with huge reach and some cash, Groupon gets a new customer acquisition channel and consumers get deals."
Writes WebProNews.com,
"It was only a matter of time. The check-in app and daily deals spaces continue to merge, and this time it looks like the poster children for both spaces are joining forces."
Adds All Things D,
"Social distribution could help Groupon move beyond email lists to a more precise and targeted audience, "And Foursquare wouldn't mind the revenue it would get from these leads."
Adds Business Insider:
"From a business perspective, both Foursquare and Groupon are about bringing together the internet, small local businesses and consumers, albeit in completely different ways."
Groupon has mobile apps so that its users can view daily deals on their mobile phone, but has always needed a true social networking element. However, if they really wanted to do it right, they should incorporate location-based technology into their daily deals offerings, and the only way to do this is to distribute their daily deals through a third-party location-based check-in service like foursquare and Loopt (already signed on with Loopt and negotiating with foursquare), develop it internally or acquire an LBS check-in service company.
There has already been a suggestion by Mashable that Groupon should acquire fioursquare. This makes sense both functionally, marketing wise and strategically, since foursquare already has a solid foothold in the LBS check-in space.
In a blog post dated January 23, 2011, I analyzed and commented on Andreesen Horowitz's plans to invest another $20 million into foursquare (already invested $20 million in June 2010), placing a value of $250 million for foursquare. As far as I know, I calculated that foursquare would run out of cash by the end of 2011, so it still needs to raise the funds. It would certainly appear plausible that Groupon, which raised $950 million capital on January 10, 2011, has the financial means to make such an acquisition, but I have a feeling they will wait until after their IPO, which is scheduled later in 2011. Those plans will probably be speeded up, after LinkedIn's highly successful, albeit controversial raise of $371 million earlier this month.
The deal with Groupon will certainly help foursquare increase its traffic and revenues from location-based daily deals, and give Groupon an opportunity to evaluate the technology and its effectiveness.
Courtesy of an article dated May 23, 2011 appearing in Fast Company and an article dated May 23, 2011 appearing in MediaPost Publications Around The Net
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