In a brief conversation with a friend and ex-classmate of mine, Steve Cheney, we discussed why I think GroupOn isn’t The Next Big Thing(tm). Biz school 101 — the most important competitive tools any company has are barriers to entry. GroupOn has none. There’s nothing stopping anyone from running the same business — look at HomeRun, LivingSocial, Blackboard Eats, etc. In fact, one might argue that the best business of all is to aggregate all of these deals and make money from affiliate marketing (see Yipit). This is not to say that GroupOn is a failure — far from it, creating a company with GroupOn’s kind of revenue numbers and negative working capital is an astonishing success — just to say that perhaps a 1B+ valuation for an unproven company in a commodity business may have been a bit hasty.
My next thought — I believe there are some pretty substantial barriers that can be erected around a business like GroupOn, and I hope to release details on some of my concepts in the next few months. We’ve been trying to crack the “local marketing” space since the advent of the internet and I believe we’re getting very close. It’s pretty exciting.
