How does a start-up not repeat Groupon's 'mistakes"?


I was reading this article about Groupon in the CS Monitor. Which starts from the assumption that the significantly decreased proposed valuation of Groupon in their IPO to $12+/- million from $25 +/- million is a reflection of significant problems in the company.

Many other concerns have been raised, including:

  • Bad service experiences by purchasers of the coupons
  • Bad experiences related to ROI and service level expectations by advertisers
  • Emergence of significant levels of competition (including spurned romancer Google)

The general conclusion of the author was that Groupon simply grew too fast. "Growing too fast" is rarely seen as a problem by those of us involved in Start-ups. Is that a cop-out answer -- or are their problems simply a symptom of growing too fast? Or . . .

  • Was it an issue of managing expectations?
  • Is it an issue of scaling in a manageable way?
  • Is this concerns just normal chatter instigated by jealous competitors?
  • Does the model of inherent flaws?
  • Did it already meet it's inherent market cap?

What do you think are the lessons to be learned by start-ups from the "Groupon" example?


asked Oct 24 '11 at 04:31
Joseph Barisonzi
12,141 points
Top digital marketing agency for SEO, content marketing, and PR: Demand Roll

1 Answer


Personally - I think the model has inherent flaws. I know several people who have run Groupons only to lose money. A significant amount of money. Almost all of the people I talk to who have used Groupon would not use it again.

The value proposition is based on cheap exposure to lots of people who are buying your goods at a large loss who may come back to your store, but typically don't because they only came because of the deal. Deal shoppers are probably not the best customer to try and acquire anyway.

I know of some successes, but they are definitely more mature companies with good management teams. Groupon is not adwords easy to manage expectations and measure results (the positive and the negative). But, it can affect cashflow in a much worse way.

answered Oct 27 '11 at 20:59
Chris Kluis
1,225 points

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