Millions of customers flock to the online discount provider each day hunting for that amazing find. Price cuts from 50-90% are not uncommon, and the public is aware. In just two short years, the company has grown to become a giant, often benefiting more from their endorsements than the advertising companies themselves. This calls into question whether or not Groupon is a viable business model, or beyond that, a sustainable one. I must say that the company has been successful in fulfilling the basic role of the business, maximizing profits. However, while it seems that Groupon has been incredibly successful in growing their company and profits these past two years, their ability to continue this is doubtful for two major reasons: competition and dissatisfaction.
First, seeing the growth of this tremendous business opportunity, many competitors have joined the market. LivingSocial as well as many others have begun to implement similar concepts as Groupon with continually increasing success. The population of online deal hunters is unlikely to grow at a rate to match the rise of this new competition.
Second, dissatisfaction among advertisers of Groupon is overwhelming. As can be seen in this article, over forty percent of companies that have used the Groupon service do not choose to return to the online deal distributor. They have found that between the remarkable price cuts and the large commision that Groupon charges, the offers prove to be less than profitable to the companies. Beyond this, many companies have found that the service does not yield return customers, the service's main appeal. For this reason, returning advertisers are limited, thus limiting Groupon's supply of deals. As Groupon begins to fight with its rising competition over the lessened number of advertisers, its power may be minimized.
Therefore, I feel that Groupon's strength maybe diminishing. For this reason, I believe that Groupon should sell to Google or partner with the media giant while the company is still a dominating force. The $5-6 billion reportedly offered by Google while Amazon offered a mere $175 million for LivingSocial displays the brand's current market position. While the company is clearly far ahead of its competition and may possibly have a window of opportunity to sell, the company clearly faces a downward struggle if it seeks to continue at the top of the game despite resistance from competition and advertisers.
