February 17, 2011

Why Groupon is smarter than you think

6_groupon
Over the last few months, it's easy to get on the what-was-Groupon-thinking? train. 

First, they walked away from a six billion dollar buyout offer from Google.  That's like Mark Cuban walking away from Yahoo in 2000.  Or Yahoo walking away from Microsoft a decade or so later. When Groupon politely declined Google's overtures, countless people  wondered, "what were they thinking!?"

Second, Groupon produced a Super Bowl spot that made light of the Tibet issue and endangered whales! The ensuing backlash led to a sacking of the TV ad and a buzz in social media.  

Believe it or not, in the end, Groupon may emerge stronger for both decisions.  First - If Groupon took Google's offer, a CNN report wonders if they would have settled for too little vs a potential IPO that would value the company at FIFTEEN billion.  But more importantly, I've found out from insiders there that the Google acquisition would have never cleared in Europe - the most important revenue territory for Groupon.  The EU isn't keen on Google, and would have held up the purchase for months or perhaps years.  Meanwhile, Groupon would be stuck in a getting-bought holding pattern, allowing Google to catch up with its own product (which they launched just recently).  The Business Insider has their own views too (Why Groupon Said No To Google).

Regarding the Super Bowl ad: Sometimes buzz trumps form.  One ad agency insider in Chicago (not working for Groupon) tells me that marketing wonderkinds had predicted a backlash, tons of social media mentions, and a windfall of PR around the spots.  They knew that the replays and extra mentions to follow in the days ahead would increase the ROI of the ad buy way beyond more socially acceptable spectacles such as Budweiser, Kia or Pepsi would produce.  In other words, by ticking us off, Groupon likely got the most bang for their super-bowl-ad buck...as dotcom ads in this venue are more about awareness than esteem or relevance.  A recent Marketwatch article makes the same suggestion. 

What's the takeaway?  Smart comes in many flavors, especially in hot-industry startup world.  What looks insane to us may actually be calculated and on-the-money when you are in a race to get big fast.  For all we know, Groupon may end up being the next Facebook in investor world and Andrew Mason may emerge as a more social, savvy and hip version of either of the Marks or either pairs of the Stanford Twins. 

 

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