What’s Next for Daily Deals After Groupon CEO’s Ouster?
Last week’s firing of Groupon founder and CEO Andrew Mason set off a fresh round of speculation over the future of online and mobile deal coupons.
Mr. Mason’s exit followed November’s news that LivingSocial had laid off nine percent of its workforce amid slowing consumer interest in daily deals. While Groupon has ventured into discounted online goods and mobile payments, those efforts haven’t paid off enough. However, many articles exploring the viability of online offers also offered some potential solutions to revive daily deals:
The Expected Shakeout: With ease of entry, Groupon’s early success led to a herd of copycats. Offers quickly flooded e-mail boxes. Over-marketing by Groupon and others to drive up subscriber rates led to spam and burnout for consumers involved.
With the daily deals marketplace maturing, a shakeout could lead to a less-competitive playing field and more tailored offers from those that survive. It’s unknown whether Groupon and LivingSocial will benefit from their first-mover advantage or if, in the end, more niche, specialized upstarts will be better positioned.
A Relevant Menu of Offers: Initially, daily deal providers showcased only a few special deals a day with a 24-hour limit and often a cap on participants. The limited choices often left consumers challenged to find any they were interested in. Also, seemingly exotic deals, such as bungee jumping, Botox, or teeth whitening, to stir attention often only appealed to a small crowd.
Groupon as well as others such as Scoutmob has shifted gears to offer a wider range of offers — including many instant deals — in what CNN.com describes as "more of a buffet and less of a blue-plate special." With some conditions, the searchable inventory of deals are generally always available and don’t face 24-hour buy limits as much.
A Business Benefit: Headlines showing dissatisfaction by business owners over daily deals, particularly with the ability to drive repeat business, kept other merchants from using the service. The jury still appears to be out since other reports have shown business owners satisfied with their daily deals experience.
More recently, deals are seeing more success when formulated to focus on timing and limiting cost. For restaurants, for instance, many deals now only apply to off-peak days (Sunday through Thursday) or hours (i.e., brunch or late afternoon). Many also have a savings limit (i.e., 50 Percent Off, Maximum Discount – $20.00).
In an exit memo aimed largely at Groupon employees, Mr. Mason wrote, "You are doing amazing things at Groupon, and you deserve the outside world to give you a second chance. I’m getting in the way of that. A fresh CEO earns you that chance. The board is aligned behind the strategy we’ve shared over the last few months, and I’ve never seen you working together more effectively as a global company — it’s time to give Groupon a relief valve from the public noise."
- Why the online ‘daily deals’ craze fizzled – CNN/KTVQ.com
- Love, Andrew: The Groupon CEO Says Goodbye – The Wall Street Journal (Sub. required)
- Rosenthal: Andrew Mason’s firing may not be a bad deal for Groupon – Chicago Tribune
- Groupon ousts CEO Andrew Mason, still faces underlying problems – The Associated Press/Mercury News
- Groupon CEO Andrew Mason’s deal expires – The Associated Press/USA Today
- Groupon’s Next CEO Must Choose Which Business It’s Really In – Business Insider
- Groupon Is No Longer a Daily Deals Business – The Wall Street Journal (Sub. required)
What do you think of the long-term viability of daily deals through third-party sites such as Groupon, LivingSocial, etc.? What, if any, is the formula for success? Are there alternative daily deal models that you think have a greater upside?