Is Groupon That Big of a Deal?
The firm's first-mover advantage may not be enough.
The firm's first-mover advantage may not be enough.
The daily-deal frenzy is here. As e-mail inboxes are inundated with offers from hundreds of local advertising firms, Groupon is the front-runner among a small lead pack of companies. Even in its short history, the company reaches nearly 100 million people around the globe. Groupon works with local merchants and sells vouchers at deep discounts (called Groupons) on their behalf, keeping a hefty chunk for itself in return for the sale. In spite of its claim as the fastest-growing company ever, we have delved into several aspects of the firm's business model to provide some context in advance of our full company report. Because the company is currently unprofitable, an understanding of where the firm may improve is critical to understanding its potential. Our key findings include the following:
Still, we can't expect the current state of the world to persist. The most obvious threat to Groupon is both current and future competition. While the largest direct competitor today is LivingSocial, we expect Google (GOOG), Facebook, and OpenTable to continue increasing their sales efforts. Logically, we expect competition to decrease the revenue share that Groupon is able to retain for its efforts. Perhaps even more troubling, many of these competitors have more customer information and other assets (such as an advertising platform) that might decrease Groupon's usefulness to merchants. Of course, we would expect Groupon to be highly acquisitive in order to increase its ability to convert customers, serve merchants, and develop a long-term, recurring revenue relationship with these local retailers. It has a first-mover advantage, but the company will have to build and acquire several assets in order to create an economic moat.
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals
and individual investors. These products and services are usually sold through
license agreements or subscriptions. Our investment management business generates
asset-based fees, which are calculated as a percentage of assets under management.
We also sell both admissions and sponsorship packages for our investment conferences
and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.