Going, going, Groupon …

You know what you think you’re worth. But what are you really worth? Some great points about company du jour Groupon in this article originally posted on Forbes. Most interesting perhaps because the article helps explain why and how value can so rapidly commoditise.

Here’s what I got out of it:

Success quickly generates a wolf pack – 425 competitors and counting have simply copied Groupon’s model. They did so because they could. There doesn’t seem to be any specific IP here that prevents duplication.

After the rain comes the flood. Lots and lots of competing sites in turn could well create “deal fatigue” – once customers have too much of a good thing, they quickly start to feel glutted, effectiveness drops and with it market share.

Why get married? Big businesses can probably replicate this process themselves rather than go via Groupon – or as close as makes no difference to the consumer.

Time for the big fish. Bigger opportunities attract bigger players. As you succeed, your competition also scales. In this case, Facebook and Google have now joined the hunt.

Sometimes regulation can amount to competition – not because legislators are necessarily taking dollars from you, but because they’re actively preventing you from getting to the dollars that are intrinsic to your business model. In the case of Groupon, those regulations include fights over the terms of the deals themselves and their very right to “market” alcohol.

Whose eating all the candy? If I was Groupon I’d be working really hard right now to persuade participants to stay with an arrangement that doesn’t continue to reward them. With just 20% of Groupon customers returning to shops for a second, non-discounted visit, the people who are really paying are the small businesses Groupon depends on. As the Coke model so clearly shows, the way to hold a supply chain together is to enable everyone to make money at every point.

What is Groupon really? I particularly liked Daniel O’Connor’s closing observation: Groupon is more of a business model than a company. If he’s right, then $6 billion is a lot of money to turn down for a business model, even a working business model.

Is Groupon really worth more than Google was looking to pay in December last year. Or will their decision to reject the search monster’s offer turn into this year’s version of Yahoo’s walk-away from Microsoft?

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