Google, Facebook and Mobile Flush Groupon Down the Toilet

Online daily deal provider Groupon, once the darling of Wall Street, has had its share of woes in recent months. Its stock is down over 50% from November's IPO price, thanks in part to a pending SEC investigation of the company’s Q4 2011 earnings restatement (actual net revenue was significantly lower when refunds to consumers for unused deals were factored in). In addition, merchants are beginning to pull back from Groupon, surveying their options in an increasingly crowded geo-local marketing landscape that includes the likes of Yelp, Google, Facebook, Amazon, Living Social and Foursquare, to name a few.

In his yearly letter to shareholders released Monday, Groupon CEO Andrew Mason tried to rally the troops by announcing his vision to re-shape the company into a one-stop marketing solution for local merchants, or as he put it, “the operating system for local commerce.”

Unfortunately for Groupon, Mason’s vision does not mesh with reality. The truth is, the daily deals site has already seen its best days, and will soon be marginalized by its competitors, especially Google and Facebook, who are rolling out geo-local couponing programs that will suck the air out of Groupon’s market share.

MOBILE HASTENS THY DEMISE

As smartphone adoption continues to grow nationwide, nearly three-quarters of smartphone owners are accessing their mobile devices to get location-based information in real time. A new study conducted by the Pew Internet & American Life Project found that about 74% of smartphone users utilize location-based services to find information. In addition, one in five (18%) are checking in to local businesses with geo-social services like Foursquare.¹

Facebook and Google have responded in kind to this trend toward mobile-based local marketing.

On May 3rd, Facebook rolled out its new local marketing platform, Facebook Offers, to all local U.S. companies. With Offers, businesses can distribute coupons or other promotions to fans directly through their news feeds. Facebook isn’t charging anything for the service, and when a Facebook user claims an Offer, his or her friends will see it in their news feed, further amplifying its reach.

Less than a week later (May 9^th), Google announced its latest update for Google Maps for Android that supports Google’s Groupon-like daily deal platform, Google Offers. With the new update, local merchants can attract customers to their storefront with free giveaways or coupons that Android users can see pop-up in real time on Google Maps.

THY COMPETITION ENSURES IT

This is not good news for Groupon, considering Facebook has nearly 500 million fairly engaged mobile users. Groupon, on the other hand, cannot boast a huge social media or search platform. As such, the daily deal site is dependent on people going out of their way to engage with its mobile app when looking for offers. The problem is, if people don’t find any relevant offers on Groupon’s mobile app, they might give up and jump on Facebook or Google, where they’re much more likely to stay engaged. It’s more advantageous for platforms like Facebook, Twitter, and Google to insert on-site offers because people are already there.²

As Facebook and Google adapt to the dramatic consumer shift to mobile, Groupon’s days are numbered. Each will utilize economies-of-scale coupled with their massive reach to outflank Groupon, while smaller players like Yelp and Foursquare continue to nibble away at Groupon's market share one merchant at a time.

I fear that before it’s all over, Andrew Mason and crew will be wishing they had taken Google up on the $6 billion buyout offer while they had the chance.

For small businesses trying to shape a marketing strategy, the intense competition in the geo-local business space is a good thing, especially with the relevant players tripping over themselves to offer your brand a better deal.

Whatever you do, make sure to experiment with various platforms, and avoid committing to any large ad spend or long-term contract until you’re absolutely sure you’ve found the golden goose. Above all, remember that in today’s era of frenetic marketing-tech innovation, the only certainty is change.

By: Chris Horton / Socialmediatoday