Is Groupon Too Much Like a Job Board to Succeed?
News broke late Thursday that daily deals pioneer Groupon’s founder and CEO, 32-year-old Andrew Mason, had been canned. A 75 percent decrease in IPO stock price will do that sometimes.
The company is a mess – complete with disgruntled employees – and Mason is taking the lion’s share of criticism. Fortunately, he’s taking it all in Groupon-style stride.
But Mason’s model was dead-on-arrival. And the comparisons to the job board industry are omnipresent.
As outlined in the book “Groupon’s Biggest Deal Ever,” the company found early success and grew a workforce of some 2,000 in just a few years. This was done to grab as much marketshare as possible with competitors like Yelp, Amazon and Google breathing down its neck.
The novelty of balloon rides and botox was contagious with consumers and the company turned down a reported $6 billion offer from Google and went IPO in 2011.
In an effort to increase profits, Groupon began cutting its marketing expenses, expecting its e-mail list of millions would mean a steady stream of free traffic. The decline of email’s effectiveness is probably a bigger reason for Groupon’s demise than will ever be reported, but that’s another post altogether.
What remained, however, was a large sales force. Local merchants are a diverse group, with many knowing little about technology while regularly being inundated with “silver bullets” promising to fill tables at lunchtime and sell out yoga classes.
The overhead to sustain such a people-heavy business is immense and the company has made moves to become a more scalable technology play, focusing on POS software and goods.
The pivot from a hand-holding, labor intensive agency for local merchants to a tech-centric, goods business will be painful and wrought with challenges.
The Job Board Parallel
Newspaper classifieds begat online job sites. The idea of taking a $5,000 print ad and turning it into a $99 online ad has been an effective model for over a decade. Without the cost of cutting down trees and paying paperboys, newspapers couldn’t compete.
However, in many cases, the large sales forces remained. Human resources, it continues to be argued, is a “people business.” Add “risk averse” to that equation and the perceived need for bodies on the street runs rampant.
Then along came Craigslist, LinkedIn and Indeed.
Armed with little more than skeleton crews and server farms big enough to keep the lights on, these companies proved that you didn’t need local offices, regional VPs and Super Bowls ads to reach the heights they’ve achieved, while disrupting the traditional recruitment advertising model in the process.
Who knew? HR people really will buy stuff without holiday gift baskets, concert tickets and lunch dates. Tech companies really could out-duel armies of sales people.
The daily deals business, or more appropriately the local market business is digitally a much younger business than employment. Groupon is a victim of timing. Someone will prove that technology can penetrate the corner yogurt shop.
“Local” will get its Indeed someday. It just won’t be Groupon.