Harvard Business School fellow Rob Wheeler, in a post at HBR, writes:
Groupon’s fundamental problem is that it has not yet discovered a viable business model. The company asserts that it will be profitable once it reaches scale but there is little reason to believe this. The financial results of Groupon’s traditional business continue to deteriorate, especially in mature markets, and new ventures such as Groupon Now also have failed to drive profits…. Groupon maintains a blind faith that growth will be its salvation. As Pets.com learned in the last bubble, such a strategy works just fine until you run out of other people’s money to spend on growth.
Ouch. Pets.com?! I too have my doubts about Groupon’s model. I mean, something got to give. Merchants offer half-off gift cards only because they know most of those gift-card purchasers will never show up to redeem them. The flood of Groupon competitors is also giving merchants negotiating power that’s chipping away at Groupon’s margins. And, after taking a deeper look at the company’s S-1, some industry observers consider Groupon to be a Ponzi scheme that requires growth by new customers to pay off earlier customers (here and here).
On the consumer side, one of two things is bound happen. One, Groupon buyers notice that they rarely redeem the promotions they bought, so they should stop buying them (see Yipit data above). Or two, new Groupon / LivingSocial / Facebook Deals trading platforms such as Yipit, Dealery and MyDeal.ly will put the gift cards into the hands of people who’ll actually use them — and merchants will stop offering such attractive promotions. So Groupon has work to do before it lands on the long-term business model.
But when I think of Pets.com, I think of mail-ordering 50-pound bags of dogfood and wonder who’s going to pay for postage. Except for the exciting fact that you could buy dogfood FROM A WEBSITE!! in 1999, Pets.com didn’t do much to revolutionize the pet supplies marketplace. Groupon, on the other hand, has created a wildly popular service that’s convinced more than 50 million people to subscribe to daily emails from merchants. Given the tens of thousands of deals Groupon pushes out to them each day, I’ve got to believe that Groupon is sitting on a pretty awesome targeting platform for businesses looking for localized marketing opportunities. Those businesses will spend around $16 billion on mobile and online platforms alone in 2011.
So maybe Groupon’s not worth $15 billion or even the $6 billion Google offered, but I think this one’s going to end a bit better than poster children from the last bubble.
According to Forrester Research: “By 2016, advertisers will spend $77 billion on interactive marketing — or as much as they do on TV today.”
Interactive marketing includes paid search, online display, mobile, email and social media marketing, which together will represent 35% of all ad spending in 2016. Forrester predicts search marketing will lose share (to 44% from today’s 55%) and daily deals will lose their appeal.
More at Mediapost.
According to Mashable, Nivea has pulled a print ad (above) in which it encourages African-American men to “re-civilize” themselves. Nivea’s apology posted to its Facebook page reads:
This ad was inappropriate and offensive. It was never our intention to offend anyone, and for this we are deeply sorry. This ad will never be used again. Diversity and equal opportunity are crucial values of our company.
Another version of the ad featured a white model, minus any recommendation to “Re-Civilize.” From Styleite:
Nivea has another ad that asks white men to “look like [they] give a damn,” which features a guy in a suit holding the similarly severed head of another guy with shaggy hair and a full beard. But that ad says nothing about re-civilization. The message there seems to be that white men already have a chance to be productive members of society, and they only need to trim a little scruff off here and there to maximize their potential to do so. In other words, they’re already civilized, they just don’t look like it.
Another development from the wonderful world of product dis-placement: Abercrombie & Fitch doesn’t want its brand associated with Jersey Shore’s The Situation. From WSJ’s Speakeasy blog:
Teen apparel retailer Abercrombie & Fitch Co. is offering to pay Michael “The Situation” Sorrentino not to wear its merchandise. The New Albany, Ohio company released a statement Tuesday evening titled “A Win-Win Situation,” in which it stated a “deep concern” over the association between Mr. Sorrentino and the brand. A&F offered up a “substantial payment” to Mr. Sorrentino “to wear an alternate brand.”
Ironic, certainly, given that “Abercrombie was apparently selling a T-shirt with the words ‘The Fitchuation’ on it last summer” (see Adweek). But not the first time a brand has used an anti-endorsement from The Situation in hopes that a double-negative is actually a positive (see Miracle Whip). And also not the first time the cast of Jersey Shore has been targeted by brands who want the opposite of product placement (see Coach sends Snooki a Gucci bag).
What a fabulous, hilarious new line of work: Make yourself famous for all the wrong reasons, and you can parlay your widespread unpopularity into a tidy income.
From Wall Street Journal’s article AOL Growth Comes At A Cost, which says “[AOL] isn’t earning enough money selling ads on those sites to cover its costs for a profitable business, analysts say.”
This guy is giving our industry a bad name!
Original photo here, via Brian Walsh.
(Photo by David B. Newman.)
On Saturday morning at 7:45am, I found myself on a yoga mat on LaSalle Street in West Hartford, CT, alongside 500 other street yogis. Instead of getting my Om on, though, I was thinking about Lululemon’s excellent street-marketing ploy. In exchange for the fee they paid to shut down two blocks of downtown West Hartford, Lululemon induced 500 likely customers to put on a spectacle that had the rest of the town’s residents gawking, chuckling, smiling, or detouring around the police barricades. I’ll bet it didn’t take three hours for half of West Hartford’s credit-card carrying inhabitants to learn that Lululemon had opened its doors at the corner of LaSalle Street and Farmington Avenue.