Google offered $6 billion and Groupon turned them down.
I know Brad Keywell, the founder of Groupon and I have all good wishes for him. (Kudos to Brad for helping sponsor TEDx Chicago in September, by the way.) Furthermore if he desires to build his own multi-billion dollar empire instead of folding his store into Google’s tent, more power to him.
But you can be sure Google’s gonna give Brad a run for his money. David Rothwell, an AdWords consultant in the UK, wrote a blog post today called “Groupon is Dead – they just don’t know it yet. There’s going to be more to Google Offers than meets the eye.” He wrote this based on a private Google meeting that he’s not permitted to give details about.
If I might prognosticate, I think you’ll see all kinds of Groupon-like offers connected with AdWords. In some cases Google might be happy to find the traffic, sell your customer a coupon and not even feel the need to share the conversion data with you :^>
After all, what would happen if Google knew the identities and buying patterns of 50,000 coupon clippers in every major city in the world?
They will.
All that information will feed back into all the other demographic and psychographic data Google collects. Add to that the fact that new CEO Larry Page is less touchy about “privacy” than his predecessor Eric Schmidt and advertisers are in for a bonanza of appetizing options.
That said, Google has some serious shortcomings compared to Groupon.
Google’s #1 shortcoming is:
They’ve got the most abysmal customer service of any Fortune 500 company, period. I have never heard of other company on earth that flat-out refuses to take phone calls from $1 million customers.
You literally have to spend $150,000 a month before they’ll even assign you a sales rep. Groupon has a substantial feet-on-the-street sales force and you don’t have to be spending $150,000 per month to talk to a Groupon rep. There are days when I’m embarrassed to be Google’s #1 advertising evangelist.
Groupon’s home page says:
“Nothing is more important to us than treating our customers well. If you ever feel like Groupon let you down, give us a call and we’ll return your purchase – simple as that.”
I’ve done online marketing and I’ve done feet on the street. One does not replace the other. And if any level of schmoozing and customer service is going to be needed to get Google Offers off the ground, then I wouldn’t count on Google being any good at it at all.
This can only be good for you, Brad Keywell. As long as Google refuses to answer the phone, they’ll never kill Brad.
The good news for all of us is: COMPETITION.
You can be sure that 1 year from now, Facebook will also be in the game. You know what I like about Facebook, Google, Microsoft and Apple?
They’re *all* fighting for your dollars.
And you should MAKE them fight for your dollars. They gotta earn a living just like the rest of us.
David Rothwell’s rather optimistic about how far Google can drive this with technology alone. He might be forgetting how difficult the operator of your local Chinese buffet probably finds the Google AdWords interface to be. I do think Google will do very well with their existing advertiser base.
Groupon will also give Google a run for their money. And they may do just fine. I think that the very idea of “Sales Conversion” will become much more complex and multi-faceted in the next few years.
My biggest concern about Groupon isn’t Google. It’s whether all those first-time loss-leader customers ever come back to eat a 2nd time at full price. I think Groupon owns those customers, not the Chinese buffet. A time could come when the coupons businesses are willing to give out are much less generous than they are now.
Because of the complexity of all this, NOW is the best time ever to be an independent marketing consultant. An awful lot of Planet Perry members that I met at our Austin seminar – and many who’ll be in Maui – are freelance consultants earning a comfortable living by making the Internet simple for harried business owners.
The owner of the local bagel shop knows he needs a strong online presence and he knows he’s not going to be the one to do it.
Facebook – Google – Groupon – what’s your crystal ball? I’d love to hear YOUR comments.
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About the Author
Perry Marshall has launched two revolutions in sales and marketing. In Pay-Per-Click advertising, he pioneered best practices and wrote the world's best selling book on Google advertising. And he's driven the 80/20 Principle deeper than any other author, creating a new movement in business.
He is referenced across the Internet and by Harvard Business Review, The New York Times, INC and Forbes Magazine.
18 Comments on “Groupon, Facebook, Google, and the future of "Conversion"”
Hate to say I told you so … :-)
Ailing e-commerce site Groupon gets US$250 million infusion
http://www.channelnewsasia.com/news/world/ailing-e-commerce-site/2665244.html
I have a different view concerning Google’s customer service.
I think that they essentially have outsourced customer service to independent marketing consultants.
This way, people have the choice:
* work with a marketing consultant and get customer service from him/her.
* work without a marketing consultant and save the consultant-fees if they don’t need customer service because they know how run the Adwords machine.
This strategy on the side of Google has the following advantages for Google:
* no need to manage a customer service dept or sales force
* marketing consultants compete with each other and are highly motivated.
They probably provide better service than even a good corporate customer service dept can provide.
But the strategy is also dangerous for Google:
* The marketing consultant owns the customer ( not Google! ).
* Therefore, the marketing consultant may recommend and use Google’s competitors without any hesitation.
Hey Cristian,
But if that would be their way of dealing with customer support, then they should at least have support for those consultants (phone, rep, etc)… But it is as it is, so we have to stick with it.
Best,
I think Groupon is great for the following applications:
* Fill low-frequency days and times in restaurants, spas etc
* sell surplus inventory
* If you have high profit margins, so that you still make a profit for the highly discounted prices of your coupons. ( then you can use Groupon for generating cash on demand, in case of a liquidity crisis for example. )
* If your products or services are so great that you can really really impress your first-time customers from Groupon so much that they come back for full price. Of course, collecting
data from your customers and following up helps a lot…
A non-localized version of Groupon would be great for selling software licenses. If your software product does require (almost) no customer support, you’ll still make a profit on these discounted prices, provided that this does not dilute your general price positioning, and provided that it really provides you with new customers who would not otherwise buy from you.
I’m pleased to have stimulated conversation!
I’ve placed a follow up post at
http://www.davidnrothwell.com/the-death-of-groupon-what-perry-marshall-says-1545/
one more point about Groupon. They are doing nothing different than the old loss leader music album (yes, that’s how old i am…i said albums) offers from days gone by…as a kid I could never figure out “how can they give me 20 records for $1”?
And then I studied direct response and I knew. They had a back end. They know lifetime customer value. So they know how much they can lose on the first sale since their conversion process is established enough to make it up on the back end. This is Dan Kennedy 101….the perpetual traffic idea of Mizel….run such an efficient back end that you can outspend everyone on the front end.
Point is Groupon only brings customers in the front door. That’s the service they provide…to give the business owner a “shot”. Exposure. Shame on the business owners if they are too dumb to collect the data on that client and get them into their own funnel.
I am a Groupon(and Living Social) customer and I’m not a coupon clipper guy per se. I just spent $300 on a Groupon to take my wife to a very expensive hotel for example. Water views, etc. So this got me in the door…now its the job of that business to romance me and give me a good reason to come back. Just like any hotel I try once.
Groupon could die, but I doubt it will be at Google’s hand. It will likely be a self administered gunshot wound if history is any indicator. They will lose focus. Decide they are in 8 businesses instead of one. Get arrogant. Fail to adequately differentiate from Living Social. Or HomeRun. Or Yelp (yes, now offering group coupons). Everyone and their mother is coming to compete. You saw the battle beginning at the Superbowl…both Living Social and Groupon competing for that Ries and Trout “first in category” spot for online coupons in the consumers mind.
The head scratcher for me? Where the hell is Entertainment coupon books in all this? They have a pre-existing national coupon network. Infrastructure in place to deliver coupons online and in book form. Boots on the street, relationships made. Seems to me if I was Groupon I’d be buying them a cup of coffee and see if they’d like to be friends.
As usual, loved this post. Two comments:
1. Google is going to crush Groupon? Like they crushed Facebook with Google Buzz, is that what you mean?
2. Or look to Blockbuster and Netflix. Blockbuster saw Netflix coming WAY ahead of time. And they did their best to leverage their brick and mortar assets vs Netflix’s narrow and focused offering. And yet who is crushing who? Upstart Netflix by a mile.
The “dominant” Blockbuster could not move with enough agility. Two things force Blockbuster to bankruptcy in my view. Customer service sucks. Not in the store, but in the online/mail offering. I mean really sucks. Kind of like…Google maybe?
Second, every strength has a corresponding weakness and Netflix (in combo with Redbox) exploited that. I have been a basketball coach and have seen this many times. No one can beat the team with all the tall players? Until the small quick team made up of midgets presses them full court and they can’t get the ball into those tall players.
In the end, Blockbuster could not shake its expansive brick and mortar overhead to move quickly. I’m sure shareholders had some say in that…pretty hard to kill a golden income goose that has produced for years…but sometimes you have to pro-actively and courageously “creatively distruct” your cash cow in order to be relevant when the next big wave comes. Almost never happens.
So will Google crush Groupon like a worm? I agree with Perry, nope. Groupon is singularly focused. Its survival depends on delivering this service. Google can’t even manage to not make its own Adwords customers feel like dog crap stuck to the bottom of your shoe. Good luck Google with managing all the boots on the ground face to face interactions that will be needed to get all these coupon offers. I work with local business owners…and most feel very good when they can buy a book off Amazon and now check their email on their smartphone…that’s the HIGH end of the curve. Oh, and I work in Seattle…one of the more technically “literate” cities in the US.
How could a group of farmers and preachers with no money or training beat the biggest superpower in the world? Singular focus. Passion. Monomaniacs on a mission. That’s how we got our start as a country. And that is why Groupon will not go quietly into the night.
To the point, relevant and shows that Google is not the only show in town. Also: reiterates that even small businesses need a website.
A good overview.
Great post Perry. I’ll say it: I think David Rothwell is way off-target.
Let’s not forget, this is the Internet where “if you build it, they will come” doesn’t always pan out. How is Orkut doing? Google Buzz? Google Me?
Haven’t heard of 1 or more of those 3? My point exactly… Facebook rules the social realm and it didn’t matter how many billions of dollars or how many tens of thousands of brilliant programmers Google had – they couldn’t topple FB… not even close.
Will Google take a bite out of Groupon’s market share? You bet, but I wouldn’t be so quick to hand them the torch… all one needs to do is look at the FB situation to see (once again) that brute force doesn’t always = victory, especially online…
Tyson: you took my words :) anybody remembers google wave? Its gonna kill FB for shure…. Where is it now? Then half year ago there was google.me, it would kill FB, the info came from eric himself…
Well half year later its stil just montenegro version of google :) call me crazy, but I think internet has this internal rule, hence life itself has it, your main product service makes 90% of all profit (80/20 as perry likes to call it :)
Just check google, its been here 10 years, and tell me what makes him dollars – Adwords. And the situation will be the same 5 years from now. Nike will still make only shoes, Apple will make 90% from iphone, mcdonalds will still make paychecks from big macs… And perry will still make the most money from adwords books & consulting! :)
And i like it that way. That just gives everyone a chance. Be the best at what you do and you’ll make your lunch. If you are the best at what you do you will be revarded. Focus on houndred things and your doomed!
Best regards from slovenia,
Luka
As much as Google has its billions, their research team hasn’t gotten the simple marketing fact that USPs rule…TOP OF MIND marketing rules! Look, people always have their perception of companies at their core level, they know YOUTUBE is for their videos (not Google video), FACEBOOK is for socialising (not Google Me), GROUPON is for coupons (not Google Local)!
If you are the first in a market, carve your own space and provide value, people will associate you with your speciality and anyone else will always be second (well, as long as you play the part of course).
Thanks Perry and David!
Re: “I think Groupon owns those customers, not the Chinese buffet.” Yes – good point – but – the Chinese buffet gets a tremendous advantage in that Groupon does not cost anything up front. Most restaurants are totally dependent on local customers – even neighborhood customers. It’s very difficult to cost-effectively buy targeted advertising in that situation. Yes, Groupon will get you a lot of blue-haired coupon clippers – but those types might well earn their meal by chattering among their friends about their new discovery.
Re: Google’s customer service. I think Google has learned (as have many major corporations) that customers who need customer service are not worth the trouble. Not unless they are spending a lot of money. Evidently Google has determined that number is $150,000 a month. You can be sure they came to that figure from diligent research. They didn’t just pull it out of a hat. Google loves hard numbers.
Spend less than $150,000 a month and you need someone to talk to? Google says, “Buh-bye. Please take your business to our smaller competitors. Our start-up days are over.”
Perry, this really isn’t so unusual. There are many businesses who wouldn’t even consider taking on a client who only had a $1 million annual budget.
The big national advertisers have multi-billion dollar budgets. Procter & Gamble’s budget is $8.6 billion. That’s $1 million per hour 24/7/365. If you were Google, who would you want? Guys like them? Or guys like us?
Michael,
All your points are well taken. Google is practicing the 80/20 rule. They’re also willing to walk away from money, which attracts more of it. Definite lesson there for all of us.
But let’s not forget – if they’re trying to buy businesses like Groupon, then they’re not in the business of selling to Procter & Gamble. They’re in the business of selling to the Chinese restaurant.
Also I think there’s another cost analysis they might not be considering, and that’s ill will from legions of small advertisers. This is the Internet after all. We talk.
Finally you’re right, not taking on a $1 million account is not so unusual. BUT they take on $5 accounts all day long and they give away $75 coupons to do it.
I think refusing to talk to a $1 million client is a mistake on their part. But regardless of our opinions, it is reality and it’s what we need to work with.
Dear Perry,
I think David Rothwell hit the nail on the head, but not for the reasons listed. I’m confused as all heck about Groupon’s business model. See, if I owned a store and I had hard costs like salaries, rent, taxes, slippage (ie: losses from theft), and various rule changes from the Wizards of Washington who hide behind their curtains….the absolute last thing on Earth I’d want walking through my door is some cheapo customer looking to walk off with $50 worth of goods for $25 and what’s worse is that these customers are not the “Upgraders” that most businesses really need. Nor are they the “Impulsives” who pick up a few extra things on the way out the door. These are the “Couponers”…and they are usually pretty disciplined. Someone should have told Brad Keywell to take the money and run like a &$#@! Because I sincerely think that the bad stories always outweigh the good. Most small business owners don’t want to clean up a mess from a failed publicity attempt because they are wearing too many hats as it is. If I owned the store I really want to own….Groupon would never get their foot in the door. I don’t want their customers….I want Neiman’s. Price is a dead issue…you said it yourself “Google has the worst customer service of any Fortune 500 company.” Customer service, white glove treatment and a selection thats deep, but not broad…with staffers who really know their stuff is the way to win. Wal-Mart won the price war…but they still lose customers to Target because people can get help..and because of Target’s sense of style. Groupon has a lot of angry business owners and I don’t get a sense of style from them at all. It feels like Wal-Mart for groups to me. Compare that to what Google may soon be able to offer to a small business owner: the local place page with offers you control for amount, date and directions. The offers only get printed if the person has some intention of actually visiting your store and you can make them for any amount you want or only off your higher priced goods…..the possibilities are limitless and will be very appealing to most harried small business owners.
The easiest way, though, for me to tell that Groupon is dying is the fact that their is a company built solely on the business of selling off unused Groupon coupons…if this isn’t an indicator of trouble I don’t know what is…even the “Couponers” aren’t redeeming their coupons.
A local bar owner I talked with shared same concern about people buying the coupon but not coming back. They have 4 indoor golf simulators that you actually swing your own clubs and hit into a large tv screen, so it’s a fairly unique hook. However, when they RA a groupon, they found the people only drank water and didnt buy food, and they were from out of town. He said there were a few good customers, but overall he said groupon was a waste of money. I think groupon is going to have to figure out how to show business owners to engage the new customers in better ways to convert one time special seekers into repeat buyers. Not sure I would have passed on 6 billion, but who knows, maybe they will be worth twice that next year.
Hi, Perry,
As a business owner who sells to restaurants, I can tell you that you’ve hit the nail on the head:
“(will) all those first-time loss-leader customers ever come back to eat a 2nd time at full price? I think Groupon owns those customers, not the Chinese buffet.”
However, the vast majority of restaurant owners don’t see it that way. Unfortunately, most of them are way too willing to use Groupon for a cash windfall today (and some good exposure – whatever that is), and then hope that a majority of purchasers never come in to redeem thier purchases!
Sad, but true.
They never get to the real problems of “are they really first time customers who come back the 2nd time” and “who actually owns the customers”
If Google and / or Facebook are smart (and history shows they are both really, really, really smart) the advertising mechanism employed must be able to divine the difference between a first time buyer and a blue-haired, coupon-clipping, share-a-meal-and-a-glass-of-water bottomfeeder restaurants cannot afford to sell to.
Can they do it? My guess is yes. What think you?
Rod
PS – Better yet, maybe I should figure out how to develop a system like that!
Hey Perry, loved the post. Two parts that stood out most to me: Google has really terrible customer service. I hate always having to use email to communicate, which can take days. In their defense they try and make their system so good that you “don’t need to contact them”, but there is always a time when you do.
And I agree that the biggest problem that the small business face that use “Groupon” is that they have to work on their “follow up” system. They have got to learn how to capture the customer and increase their life time customer value.
Groupon is doing their job getting butts in the seats, but that’s when the small business owners need to do theirs and turn that first time customer into a long time customer.
Capture email addresses &/or physical address at least. Then follow up. And increasing the dollar value per customer is critical also (upsells). Sorry don’t wanna go off on a rant. lol
My God… what you said below soo true!
“They’ve got the most abysmal customer service of any Fortune 500 company, period. I have never heard of other company on earth that flat-out refuses to take phone calls from $1 million customers.”
Google parades around like the big bully many times and there seems to be little that can be done about it.
I sincerely hope that Google, Facebook, and Groupon don’t put the squeeze on small businesses anymore than what they already have.
Their playing of corporate favorites has been more evident lately. It’s like, if you don’t spend hundreds of thousands per month, they don’t value you as much and make you go through more hoops and hurdles.