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Comment by ghshephard | Hacker News Reader

Two Anecdotes:

1) I'm hanging out with Family in Abbotsford, British Columbia, and wherever I go browsing, I'm getting Groupon Ads for interesting things to buy in Abbotsoford. I've been half tempted (for the first time in a long time) to click on these ads. There is 0% chance I would have considered going to these places without those ads. If I find something new and interesting, there is a very good chance that I (or my family) will return as repeat customers.

2) My mother, is trying to figure out how to attract new business into her Coffee Shop for a new line - just to let people know it exists, and is considering a groupon deal.

If, in fact, groupon has a sustainable profitable model in their existing markets, and the $950mm Series G is there to expand the same model into other markets, and, if they have no entrenched competition in those markets - then this move makes absolute sense.

Time will tell if all of these conditions hold true.

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Another anecdote: most people I've talk to recently outside of the startup/valley/tech scene have heard of Groupon and many of them have used it. My parents have been using it since before I had even heard of it.

But I still think they're crazy for turning down $6 billion from Google.

one anecdote: I've bought into 3 different groupon deals. Yes they were things I probably wouldn't of done on my own, and after trying them..I realized why I wouldn't of done them on my own and really had little interest in them other than thinking of doing it because it was a good deal. Sort of expensive way to learn what I don't care for.

> My mother, is trying to figure out how to attract new business into her Coffee Shop for a new line - just to let people know it exists, and is considering a groupon deal.

Have you read the cautionary tale from Posies Cafe? There will be tons of people who will try the new product, but most of them won't stick around long enough to pay full value. Gotta be careful with this form of advertising. (Disclaimer: I know the owner of Posies.)

http://news.ycombinator.com/item?id=1698833

Yes, in fact if you notice, I'm one of the top commenters on that thread - it's how I discovered most of what I know about Groupon, in fact - reading that story, and hearing about other ycombinator comments informed my thinking.

I don't really understand how any small business who spends more than 10 minutes googling can spend unwisely with Groupon. My mother and her partner identified a ton of concerns they had with groupon in about 60 seconds, and how they would deal with it. Small business owners are amazingly sophisticated when it comes to these types of deals. (With the exception of the $1400 on Door-Knockers they spent 5 years ago, that didn't show a great conversion rate, and I hear about every time I visit.)

Here are some of the issues they brought up:

o How badly will her regulars be impacted by a huge surge in business.

o Will their "vibe" be negatively impacted by large crowds of people (she runs a very intimate coffee/tea shop)

o How should she price her product so that a 5% conversion rate shows an ROI in about 6 months.

o How much staff should she have on hand the week following the Groupon to make sure that they can handle the business.

o How much should she spend on collateral, marketing, packaging to leverage these new people, and convert them to regulars.

o Preparing the staff for the lousy tipping (Though, they already knew people coming in with coupons never, ever tip)

I'll report back if they execute their groupon. Be interesting to see a real world execution from the side of the small business.

Ah, I hadn't compared usernames.

Your mother thought of some very detailed gotchas. I too would be interested to hear how it goes in the end.

It's the footraffic version of Digg. Publishers never figured out how to convert Diggers into return visitors. Then again, Groupon appears to be working harder on that front than Digg did.

Yes, Groupon is the brick-and-mortars version of Digg. But I will point-out that Digg links are good for SEO, so there is at least some degree of permanence. I guess the Groupon equivalent would be word-of-mouth referrals, though I'm afraid that many reviews would be, "I went to this awesome place [only after artificially lowering the price] that I found on Groupon". The implied sweet deal from Groupon might be something that other potential customers would expect as well before trying a new place out.

I respect that Groupon has more resources available for businesses than Digg had for publishers. I still don't hear many stories about businesses BUILDING THEIR BUSINESS through Groupon. I respect the heck out of what they've done, but don't see how it can last 4-5, 10 years once the fad wears thin. Feels like tulips, not railroads.

I have yet to buy a groupon, but I keep looking daily - I got some groupon gift cards.

There seems to be way too many ads for spas, salons and the like, which do not interest me, yet they seem to attract tons of buyers..

The expected lifetime value of a custom acquisition is so high for these services that Groupon makes sense even if the conversion rate is < 5%. And, since most salon owners can push the risk downward to their commissioned (paid by the job, really) staff, there's even less disincentive. Only the staffers still trying to build a book of business will accept Groupon customers, and those employees' opportunity losses are low because they end-up sitting around between clients anyway. So, the risk/reward trade-off of using Grupon in these industries is quite good.

If you have an account you can specify your preferred types of deals in your profile.

The number of spas/salons annoys me too. I've found that Living Social has had more local restaurants than Groupon in my area (LA).

Good anecdotes, but whether people use Groupon isn't really in question (this question typically gets resolved when companies do their A round, not their G round).

The question with Groupon is whether their model is defensible; that is to say, is it possible for 100 competitors to spring up and chip away at their business (or would it be possible for Google, eBay, or another BigCo to leverage their existing users to take a large chunk of their business in a short time).

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