To listen to most of the stock market chatter is to think Groupon is getting the same lift from social media that's propelled LinkedIn
Don't be tricked by the chatter. If anything, social media is about to become a huge problem for Groupon, one that it's attempting to solve through partnerships with location-centric networks Loopt and Foursquare. I'll have more on these agreements in a minute. First, let's talk about what Groupon is and why Google
The Next Big Thing in bargain shopping
Groupon is aggregated coupon buying. Sign up for a deal, spread the word, and if enough people sign up with you, everyone gets the discount. Consumers win, businesses win. So while Groupon itself isn't a form of social media, Twitter, Facebook, email, texting, instant messaging, and other forms of digital connectivity are important to its growth.
And there's been plenty of growth. According to Knowledge@Wharton, Chicago-based Groupon is on track to bring in between $3 billion and $4 billion in revenue this year alone. Facebook's 2010 sales were reported to be only around $2 billion in its sixth year of existence. Groupon is reaching these lofty revenue heights after launching only in late 2008.
Crazy growth like that always attracts imitators, and Groupon is no exception. LivingSocial, whose investors include Amazon.com
When everything's social, nothing is
But it's Google and Facebook that represent the biggest threats. The Big G is testing Google Offers in New York City, Oakland, San Francisco, and Portland, Ore. The beta version of Facebook Deals is available in Atlanta, Austin, Dallas, San Diego, and San Francisco. Wider distribution for each could arrive before the end of the year.
Each service mixes social media and group buying. Facebook Deals proposes to add an insignia to users' home screens that, when clicked, would show all currently available offers. "Like" or purchase a deal, and it'll show up in your home news feed. You can also share deals directly with Facebook friends.
Google Offers is more like a combination of Groupon and Foursquare. Sign up, and you'll get localized offers sent to your inbox. Check in somewhere with Google Places, and if an offer is available, it'll be shown to you. In each case, Google wants to be your shopping companion.
The Big G also wants to replace your billfold. Google Wallet will store on your Android phone as much credit card, bank card, coupon, and loyalty card info as you'd like and use near field communications (NFC) technology to process transactions. Currently, only the Nexus S is NFC-capable, but that should change with NFC chipset supplier NXP Semiconductors
Taken together, Facebook and Google are pushing the boundaries of couponing well beyond Costco-style bulk buying. They're enabling something more social and more instantaneous. Call it just-in-time-couponing, delivered by someone you trust (i.e., someone you're connected to) at the moment that it's most useful (i.e., when you're out shopping).
What was it you said about those partnerships?
Which brings us back to Groupon's efforts to partner with mobile social networks. Loopt signed on last week, and an agreement with Foursquare is in development. In each case, Groupon would use location data to target deals to members. Purchases might then appear to your Loopt or Foursquare "friends," a la Facebook's approach with Deals.
However these agreements are implemented, it appears Groupon executives know that their service needs to be more social and more mobile. Two weeks ago, they unveiled a new smartphone app called Groupon Now! for finding nearby deals in select cities. (Denver, where I live, hadn't made the cut as of this writing.) The next step will be to link to users' Foursquare and Loopt networks and then their Twitter chums and Facebook friends. There's no alternative. Groupon must take Groupon Now! national as quickly as possible. My guess is it'll happen sooner than any of us think.
Why? Groupon is in a race with Google and Facebook and more than 400 other would-be couponing kings. All signs point to social skill as a prerequisite for sustainable profit when anyone with an Internet connection and a little coding talent can get into the business of distributing e-deals.
But don't take my word for it. Take a minute to watch this free video right now, and you'll walk away with a richer understanding of how cloud computing is changing everything, creating both risks and opportunities for investors in the process.
