How to Create a $15 Billion Business in 3 Years?
I always wondered. How did a startup like Groupon grow to reach a market value of $15 billion -yes you read that right- in only three years of operation and a 2010 estimated revenue of $350 million and magically creating the fastest growing company ever. It’s simple. Creativity.
Groupon is a website that offers one group coupon or “Groupon” every day at each of its localized websites. They offer a daily deal with a discount usually between 50% and 90%, the deal becomes valid when a predefined number of users buy the deal. Users benefit from the discount, retailers get more customers, and Groupon takes its cut and everyone is happy. Plain simple.
But really. How did it work? I believe the three main factors that made this work are timing, targeting, and social power.
Groupon launched in late 2008; November to be more specific. Does that period of time remind you of anything? Exactly. Recession.
Late 2008 represented the peak of the economic chaos. People were being laid off and companies were -and still- applying tight budgets to minimize expenses. For all the known reasons, customer purchasing power declined dramatically and businesses lost a large portion of their customer base. Groupon innovated a great business model giving businesses a chance to get more customers leading to higher sales figures. And in the other hand, it provided customers with great deals offering them more than 50% of discount. They both benefited at times when they needed it the most and are still benefiting as the recession is technically in it’s final stages but the whole world is still suffering its impact.
Young educated females. 68% of Groupon users are of age between 18-34 years old, 80% are with either undergraduate or graduate degree, and 77% are females. Yes 77% are females! Groupon is playing it right. Focused and clear targeting on a segment with great purchasing power. Females in general like attention and services focused on them.
Groupon mainly used Facebook for its aggressive advertising campaign to target the aforementioned demographics. I’m sure most of Facebook users have came across at least one Groupon ad.
Word of mouth was one of the biggest factors that led Groupon to its impressive success. They created a buzz on Facebook, Twitter, and other social media especially when they turned down Google’s $6 billion acquisition offer. Groupon is also implementing a referral system offering $10 when you refer users and they do a purchase. The fact that a minimum number of purchases should be achieved for a Groupon deal to go through, along with the big countdown timer of deal expiry, has created a sense of urgency for users and encouraged them to refer more friends. And of course more $10 credits are earned.
Groupon is widely reachable and serving customers in major geographic markets providing localized deals in around 200 cities in the U.S. only, in addition to its international presence in countries like Canada, Brazil, Germany, Greece, France, the Netherlands, Belgium, the United Kingdom, Italy, Portugal, Spain, Japan, Poland, Turkey, Mexico, Peru, Chile, Colombia, Sweden, Argentina and Romania.
It is worth mentioning that hundreds of clones are surfacing all over the web providing identical services. GoNabIt is an example of a successful clone present in the Middle East and currently operating in the United Arab Emirates, Jordan, Kingdom of Saudi Arabia, Kuwait, and Lebanon. It’s ridiculously obvious how they are copycatting Groupon in each tiny detail. They are even offering exactly the equivalent of $10 in all countries as a reward in their referral system -same as Groupon- which is equal to AED 37 in UAE as an example. It’s sad that our region lacks genuine creativity.
about 3 years ago - No comments
The startup scene in the Middle East is nothing when compared to that of the United States or Europe. Apart from a few success stories, startups here often fail in their initial stages, or at best, they fail to scale and expand and just freeze at some point. Long story short, I came across a resignation letter of a co-founder of one of the startups in the Middle East that was alive for two years and thought I should share it here as I find it a bit interesting.
The time has come for me to leave [company name]. It’s very hard for me to leave the startup I always wanted to build, the place where I found my passion, but let’s face it, with the current circumstances, people, attitude, and structure, this company is not going anywhere. Unfortunately, [company name] has failed before it even started.
about 4 years ago - 3 comments
Here we go again. After analyzing the success of Groupon as an e-commerce model based on group purchase, and how the Arab World got filled with similar clones, yet a new trend in e-commerce is surfacing in the Middle East. And it’s succeeding. Big time!
Flash Sales websites are invitation-only social-friendly e-retailers who provide significant discounts that can reach 70% on top luxurious brands available for a brief window of time. This definition sums up the success factors of similar models. Below is a break down of these factors:
about 5 years ago - 2 comments
I was searching twitter for tweets related to Japan after the 8.9 earthquake strike to find out the above tweet on top of my search results with more than 3000 retweets. It got my attention and made me think I should do some research on how this most earthquake-prone country in the world is prepared for such earthquake and if they were successful in their preparations. So here is what I found -and it is impressive!
First thing I came across in my search is this advice from Japan Guide website on preparedness to earthquakes: “Every household should keep a survival kit with a flashlight, a radio, a first aid kit and enough food and water to last for a few days. Avoid placing heavy objects in places where they could easily fall during an earthquake and cause injury or block exits. Have a fire extinguisher. Familiarize yourself with the designated evacuation area in your neighborhood.”