How Many Groupons Can We Stand?

Groupon, the deal-of-the-day company, certainly left a trail of salivating investors from their last round of funding.  Now, it’s rumored that they’re seeking funding at a valuation around $3 billion.

First, congratulations to them:  they’ve built a real business with real revenues, and created a whole new category in the market.  That is a real accomplishment.

But, this is now bordering on crazy.  It reminds me of the early days of email marketing, when marketers were paying $0.15 (yes, 15 cents) per email.  It was a new medium, so nobody knew how to price it.  And, in those early days, it actually worked well.

Then email fatigue set in with customers, and effectiveness dropped.  Some high-flying, fast-growing email marketing companies saw revenues stall, then drop steeply.

I think the same thing happens with the deal-of-the-day category.   As more offers become available from various companies, effectiveness fades and fatigue sets in.

Also, some existing content sites are much better positioned to offer daily deals as a feature, not as the premise for the entire company.  For example, Yelp’s first deal of the day in San Francisco reportedly went quite well.

I wish Groupon (and clones) the best, but at a $3b valuation, I want to go short.

One thought on “How Many Groupons Can We Stand?

  1. I agree that the social coupon category is becoming saturated and that it could very well lose effectiveness through fatigue. I believe it may also become weakened as the economy improves – As consumers become fatigued and no longer need coupons – the coupons and the provider become an unnecessary inconvenience.

Leave a Reply

Your email address will not be published. Required fields are marked *