So you think you could build your own Groupon? | Hacker News Reader

So you think you could build your own Groupon?

thenextweb.com

24 pointsmoses140017 comments

This article is more about if you were in Groupon's shoes could you have done the following...

Yes. I think I could build my own Groupon... in fact hundreds of people have and many are quite profitable.

Could I build it to scale? Could I build a sustainable business that will be there for the long haul or be significant enough to be acquired? Could I find an untapped niche that the group buying biz model could exploit?

The writer doesn't even list many accomplishments and the barriers to entry that Groupon has created (besides capital and what access to capital buys you i.e. PR, buying competitors, buying super bowl ads.

He should have said... Could you compete against Groupon's salesforce? Could you compete with their ever decreasing cost of customer acquisition? Could you compete with their high gross margins while you are forced to cut your margins to compete?

Most of those people are idiots. Even if you don't take into account everything listed in that post, considering you need enough people to tip a deal for it to work is hard enough. In the early stages of building a Groupon clone, the toughest challenge is getting enough people on board day 1 to tip a deal. If you don't get enough people and the deal doesn't tip, you already suck. Most people who aren't in the marketing world don't realize how difficult this is and I'm sure this is at the top of the list for many of the 2000+ Groupon clones as to why they fail. The ones that succeed are those lucky enough to get enough users early on to tip onto the next stage. But even then there are more challenges than merely how "simple" an idea Groupon is. And Groupon isn't the only exception. Every startup has a list of challenges people on the outside can only begin to imagine.

"Tipping a deal" is an artificial constraint. The only thing it does in the model is incentivize customers 1 ~ 10 to bring in customers 11 ~ 200+. You can use any manner of means to prevent deals from failing, from shill-tipping to just out-and-out lying about that artificial constraint actually existing. (The ability to guarantee 200+ customers to the merchant is nice, but you can finesse this by good selection of starting deals or subrosa agreements with the merchant where you either deliver 200 customers or the deal is free and you'll compensate them.)

That's a lot of cost to eat up.

err.. aren't you also proving that Groupon isn't a scaleable business, since it requires an army of salespeople to negotiate deals with retailers, and massage the pricing beforehand.

I've read blogs (Techcrunch & the FDA groupon fail) that say groupon ask retailers to raise prices a month before, so when they offer deals, it appears as though you're getting 50% off, but you're really getting 50% of a product/service that has been marked up 30% a month beforehand. Price msassaging requires direct sales contact, and it'd be hard to automate, since you need sales personnel to follow up.

I'd like to know how EBITDA profitable Groupon is. None of this revenue b.s. It's a meaningless data point, without the context of EBITDA.

I agree on the profit and not on the revenue that matters. But that said, we're talking about Groupon clones here. Groupon itself has proven to gain traction and has made the model work. I'm sure they're profitable. They do have an army of salespeople. While I personally hate that portion of their model, I can't argue they're doing well (figuratively speaking).

"that Groupon isn't a scaleable business, since it requires an army of salespeople to negotiate deals with retailers"

Requiring people doesn't make it non-scalable. Doesn't McDonalds scale? If you have a process to acquire, train and retain sales personnel, it can be made to scale. 'Scale' != 'throw more/better hard/software at it'.

Cloning Groupon is the easy part, the hard part is executing.

Executing what? The word execution in the startup world refers to everything you do to build a startup, including cloning the competition. If you're talking about a specific type of startup, you need to identify what's hard beyond simply "execution" since that's a given.

Probably sales, getting people to buy the ads.

I'm referring to executing the Groupon "business model" which is what this article is really about. It doesn't take much "execution" to clone and create a landing page for subscribers. But thank you for your insightful knowledge into the meaning of the word "execution" in the startup world.

Keep in mind that the concept of Groupon not just need a group of people to tip the deal but also would need a "sustained effort" of a group of a people behind the scenes to get the interestingness of Groupon going. If you think about it, it's not that easy of a part to find those interesting local deals and set constraints on top of it and on and on...

To me, that's one reason all these clones fail miserably.

I'm pretty sure Groupon has more than 1 employee.

Actually, that's where the article misses the hard part, which is building an effective, scalable sales force that can get a constant stream of suitable merchants through the door, which requires a rather different skillset to knocking up a mailing list app over a weekend.

Splashing your profits on a Superbowl ad is the easy bit.

'Put together a business plan to raise the $1million needed to take it from an idea in your head to an actual business'. How would you possibly spend $1M simply getting a Groupon clone started?

Website design and development, sales staff to get the deals to populate the site, customer support staff to keep customers on side, system administrators, a marketing person or team, advertising, PR, office space... the list goes on.

Sure it doesn't cost $1m to get a Groupon clone built in php on elance.com but if you plan to succeed in an increasingly crowded space you're going to need money.

Facebook and AdWords Content Network ads to get email submissions. (If you want 10k strong opt-in email lists in each of 10 cities for your early adopter set, that cost cost you $100k by itself. More as GroupOn and competitors grab the low hanging fruit of signups and cheap ad inventory.)

Reply on news.ycombinator.com