Yeah. Good catch.

Someone else described it, pretty accurately, as a free modern equivalent to those coupon-books for local places that high school groups used to sell for fundraising.

It's really interesting to talk to people in the restaurant business about their experience with the different deal services. From my perspective, they (from owners and managers down to servers) seem to like ScoutMob more than Groupon for a handful of different reasons.

Again, they're probably getting treated great because it's a local startup, but take that for what you will.

I used the one for Fritti 2 nights ago; didn't see you there

I have twice (maybe 3 times?) used a Scoutmob where the server gave me the discount without looking at the code, and told me to save it for another time. Is this their way of getting around having to pay Scoutmob their cut?

lol yeah definitely. plus the server will probably get a much nicer tip.

Some restaurants don't take the coupon or punch the card from those old entertainment books. The hope is that the diners will return again and again.

This sets the owner up to be scammed by all the servers bigtime. At end of shift server says to manager "oh yeah, 10 tables used the 50% off coupon so please reduce those tickets by 50%" when in fact 0 guests used a coupon and were charged full price and the server pockets the difference.

This is why manager should verify with the guest that they used a coupon, because even if mgr insists on getting physical coupons at end of shift server can still come to work with a pocket full of coupons to use after the bill is paid by guests who paid full price.

My experience with them not taking the coupon has always been from the manager. I run good sometimes, once having dinner with my daughter at The Cactus Club, the manager came over and said we were the bill on the house that night. His only request was to tip the waitress as if there was no discount at all.

I agree on the scam potential if left unchecked. But that is a mangers responsibility anyways.

Very good post Henry.

+1 more or less.

I think groupon could easily be replaced. Just like myspace was replaced (are they still operating even?. At some point, a new facebook will probably get hot, and then we'll wonder whatever happened to them.

Mashable is reporting Groupon is preparing for a Spring 2011 IPO at a $15 - $20 billion valuation.

http://mashable.com/2011/01/13/group...uation-report/

MySpace is trying to sell. They announced it a day after laying off 47% of their workforce.

I remember when Facebook turned down the 1.2B offer or whatever it was 4-5 years ago. News Corp had previously purchased Myspace for $600M in a deal Rupert Murdoch referred to as "pennies on the dollar." I wonder how he feels about that now...

Lol probably not a buy & hold stock, but I'm guessing social coupon sites are going to make a lot of millionaires in the next few years through acquisitions. I've got a decent domain I picked up for a coupon type site a few years ago... maybe I should develop it...

if groupon can emerge as the dominant location-based lead-gen company (like google was for internet search), there's much more than 5bb at stake.

http://www.businessinsider.com/trave...million-2011-1

Will people ever pay full price for a spa day again?

http://www.businessinsider.com/you-w...ley+Insider%29

Not sure how well this model would work as a ServiceMagic / Angie's List type site.

Well I have been buying a lot of these things lately. I eat out a lot, so I mostly just buy the ones for restaurants.

A few observations...
I can see how this could be a good advertising service for a new business. It creates awareness in a hurry. If you're an established business, I don't think this advertising method is too effective. If you're not making it, then losing a bunch of money to hit and run deal hunters isn't likely to help you pick up enough customers to turn it around. If you are making money, then why would you want to have your regular customers get used to the idea of deep discounts? For launching a new product out of an existing business, this could be useful because it plays to Groupon's strength. It can build awareness in a hurry.

Whether I get the deal from Groupon or Livingsocial or Facebook, doesn't matter to me, all it costs me is an email. I think there will be a lot of competition in this space. Margins are going to fall. If Facebook is smart, they will win.

I don't know if I am a typical user, but I am spending less total money than I otherwise would. The restaurants are attractive to me because that is something I already do and I would like to do it cheaper. I am not likely to sign up for a bunch of spa days because they are less expensive.

Also:
http://globaleconomicanalysis.blogsp...-in-japan.html

Google is launching their own best deal service.

http://mashable.com/2011/01/20/google-offers/

Google's payment terms are a lot more appealing to businesses than Groupon's payment terms. IMO, Groupon's net 45 payment term is a huge roadblock. A lot of small/local businesses can't afford to run campaigns with Groupon and not get paid for 45 days. Also, the Offers Fact Sheet posted on mashable says that businesses will also get the added value of getting free exposure across Google's ad networks.

This has to hurt Groupon's upcoming IPO.

I don't see how as it was completely obvious that the other internet giants like Google and Facebook would enter this business and crush Groupon.

Speaking to this, one of my clients who ones a Chicago full service day spa/salon downtown ran a Groupon last year. Her experience was pretty much this. The deal worked in that it got in a ton of new customers that wouldn't have otherwise used her service. But hardly any were repeat customers (she told me 5-10 maybe).

As for the second bolded point - I definitely agree. Groupon-type deals would be great for launching new businesses. The problem is a lot of startups are usually already low on cash so the lag time in recovering the cost would be an issue.

Would she do it again? 5-10 repeats might be worth it.

what i meant was maybe 5-10 came in a second time, but close to none returned after. She definitely would not do it again.

I don't see how GOOG didn't know they could crush them before they had the $6B rejected.

That's one of the major differences between an owner, and a marketing company. For the former its not just a % of net sales in a ledger, its actual cash money that must be spent. While the latter see an instant profit for very little capital expended.

An old buddy of mine never advertised his auto repair shop, even in things like school event programs or other niche products. His opinion was he was working for free for a few hrs just to get his cash back.

imo, these types of mass marketing efforts can work if the intent is to raise the profile and gross receipts in a business prior to selling it. That's a common trend in restaurants, the seller has deals with many locals, institutions, special interest groups; then after the sale, all those patrons suddenly stop showing up.

It's easier to acquire someone else who has grown a company in just 2 years to $1B in annual revenue then to try to duplicate their success. I'm sure they were more than willing to start it themselves but if they could just acquire the #1 player and their team it saves a lot of trouble.

Also, my wife got a 50% off lasik deal from LivingSocial last week (bought in december, surgery last week). I talked to the person at the clinic who arranged the deal with LivingSocial and she had similar comments about groupon.

They wanted standard 50% of rev and wouldn't budge at all. After trying to haggle with them she went with livingsocial instead who took ~25% of rev IIRC. Groupon rep called her up immediately when the deal went out and said "I thought we were working together!?" and she told him the rake was a deal killer for them. They sold ~100+ of the coupons @ $2100 each. gg Groupon

Later they did a similar deal in a different market with Groupon who agreed to take just 20%. They featured it as a side deal instead of the main deal (rock climbing lol) and only sold like 75 of them after extending the deal to 5 days. Groupons main sales pitch is their massive subscriber base which dwarfs the competition.

I kind of get the impression that Groupon thinks they have something unique and can push people around. I don't think they're going to wise up any time soon.

My wife's salon did a sale of an expensive hair procedure with groupon. (Keratin Complex) In our small market, they sold ~50 of the $200 gift cards. (Valued at $400)

A week later a different salon did the same exact deal except it was $175. That salon did it with livingsocial. They sold 3 gift cards.