Brij Singh's Blog

June 4, 2011

Email Come Ons to Groupons – Is There Any Act 2?

Filed under: Tech — Brij @ 9:01 am

Groupon IPO is an important event from local deal/social commerce sector point of view. If IPO tanks, sector will be looked upon with suspicion. Millions of dollars going into new start-ups can suddenly vanish. March to IPO is usually part of any start-up pitch deck. Groupon S1 report is undergoing intense analysis. There is a battle of sort going on between skeptics and believers.

Personally I don’t buy into points made by lot of blog posts that Groupon model is unethical and it’s essentially a new age ponzi scheme. Building efficient sales execution machine is a huge challenge. They have made few assumptions and those are largely based on huge capital infusion.

(size of local deals market)

I don’t know much about the local deal market. Market size seems to be pretty big. Though I am still trying to learn and understand if there is any fundamental user behavior shift going on. I am not sure about that. Though I followed for some time to understand how they are using email and that’s about it. There is a huge difference between social commerce ( think social graph) and local deal (think nicely crafted email campaign). Email makes Groupon model extremely simple to understand and act on.

I read DHH’s post, read Yipit’s indepth review, and read Andrew Chen’s post to understand overall marketing context in which Groupon is operating. All this intense scrutiny will make this IPO most watched in recent history.

What we don’t know is how much importance we need to give to time to market in this sector. If Groupon model is hard to build and in turn defensible then they are next Amazon. On that front I am not sure they are on solid ground. Groupon runs on email. They have pumped in huge amount of money to gain subscribers and those are mainly email addresses.

So who else has lot of email addresses and sales team motivated to sell deals? That list is long – Google, Amazon, Microsoft, Yahoo, Facebook and in global terms there are many more players. Any architecture, which Groupon designs, for defensibility has to involve email innovation. If they have figured that out then they will continue to win.

It’s the act 2 of Groupon we need to see. I am curious as to what they will do to email as a deal delivery vehicle.

Update: Found few interesting points on Rakesh Agrawal’s Quora post. That post is highly recommended, top quality analysis there by Rakesh. Here are some of the points related to email –

A key metric for me would be email open rates. Groupon damn well better have that metric in house. They might have left it out for competitive reasons, but it might also be because the numbers are declining.

I estimate the cost of a list subscriber at $6.40 and the cost of an actual purchaser at $26.50. That’s a big number for a business with few barriers to entry. For Netflix, this number is $18.03 — but Netflix has a subscription business with recurring revenue

1 in 5 of mailing list subscribers have made a purchase. Although high by direct mail standards, this is lower than I expected.

(Email) Subscribers grew 64% from Dec through March, purchasers grew 71%.

…noticed that the 1-click unsubscribe link on Groupon emails I receive changed to a subscription management link, which requires more work.

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