go-Digital Blog on Digital Marketing

It’s hard to believe that another company could outdo Mercata’s spectacular $100 million flameout in 2000 in the first dot com bubble crash. But Groupon is about to do just that – by being bigger, badder, and even more spectacular. It raised $1 BILLION and will flame out before the year is out (my prediction from January 2011: Prediction: Groupon is/will be the biggest pump-and-dump scheme of all time (or in recent memory) )

Despite the recent reports of Facebook shuttering its daily deals offering, Yelp scaling back its service, and Groupon “not paying much attention” to it, I believe it is not so much that they could not compete with Groupon but that the market was smaller than previously expected and that it had mostly been tapped out already. If most merchants say they will not do another Groupon like campaign again and when revenue per merchant in mature markets like Boston are off by 60% in the space of a year, those trends don’t bode well for Groupon or any daily deal site.

I have not always been bearish about Groupon and I think they did 2 things brilliantly that helped it break through where previous group buying and deal sites could not: 1) leveraged social media and people sharing with others – a deal does not become activated unless the minimum number of people buy it (so friends will share with exactly those friends who they know will also like the deal); and 2) there was a deadline to buy the deal once it was activated; if you’ve ever missed buying a deal you will try not to miss another one. This triggers the desired action.  These are the 2 positives that should be replicated going forward.

But all the other bad things and screwups (since Groupon’s inception) should be avoided .  See below for the chorus and refrains.

Insider Selling took $870 million of the $1 billion off the table for investors and founders.

Andrew Mason fires back at critics via email, but in doing so may have violated “quiet period”

Wired had to pull its IPO in 1996 after a similar “employee email.”

Groupon’s PR boss suddenly quits after 2 months on the job, and just before Mason’s “employee email”

Groupon’s China operations are imploding

Groupon’s traffic tumbles 50% from June to August

Groupon’s revenue per merchant in mature markets like Boston is off more than 60% YoY