Groupon's Andrew Mason To Charlie Rose: "We Are The 'N Sync Of Websites"

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Groupon CEO Andrew Mason was on Charlie Rose last night. He refused to answer any questions about why Groupon spurned Google’s $6 billion acquisition offer, but he did reveal a few stats and his thinking on what makes Groupon successful. Groupon now boasts 40 million subscribers for its daily deals, and added 3 million last week alone. In the beginning of the year, it was adding only about 100,000 new subscribers a week.

Mason attributes Groupon’s hypergrowth to the fact that it is inherently social and its growth is accelerated by Facebook and Twitter. Deals propagate much faster than they ever could before because “the social graph . . . just allows companies to grow at a rate that is unprecedented.” He explains that Groupon’s success needs to be understood in this context:

When people call us the fastest growing company ever, I think of us as like the ‘N Sync of websites, like we have had good tunes, but we’re not The Beatles. It’s not like we’re the best thing ever. . . . I think that we’ll continue to see more companies like us who make us—who put us to shame a couple years from now with their rate of growth.

Mason also describes Groupon’s business model as “pay-for-performance marketing” (something I’ve touched upon before):

Local businesses have never had a great way to
get customers in the door. . . . So what Groupon does is — it’s for the first time local businesses get performance-based marketing. They only pay when these customers walk in the door. We get them in the door and then it’s up to them to give them an amazing experience.

You can watch the full interview here or read the full transcript below (courtesy of Charlie Rose):

TRANSCRIPT:

CHARLIE ROSE: Andrew Mason is here.  He is one of the founders and

also the CEO of the website Groupon.  Every day it offers deals in local

markets with deep discounts on everything from hotels to yoga to

restaurants.

Since Mason started Groupon in 2008, it has grown exponentially.  It

already has 35 million subscribers in more than 300 cities globally.  It’s

also created a lucrative business model that is expected to result in

hundreds of millions of dollars of revenue this year.

He has done this all without losing his sense of humor.  The deals are

announced every day with quirky descriptions written by Groupon’s staff of

writers.  Mason once hired a man to walk around the office in a ballerina

outfit with no explanation just to see what kind of reaction he got.

I am pleased to have Andrew Mason at the table for the first time.

Welcome.

ANDREW MASON: Thank you for having me, Charlie.

CHARLIE ROSE: So how would you define all of that I just talked

about?

ANDREW MASON: I think part of what makes Groupon really fun for

consumers is this element of discovery, finding new things, being surprised

every morning what the deal is.  And we try to remain surprising and we try

to do things, whether it’s the deal you’re getting or whether it’s the way

we’re writing about the deal or whether it’s the brand and the culture of

the company, that’s constantly surprising people, because that’s kind of

the spice of life.

CHARLIE ROSE: Give us the history of this.

ANDREW MASON: We started Groupon in November 2008, launched it in our

home town of Chicago.

CHARLIE ROSE: Two years ago.

ANDREW MASON: Two years and a month.  We just switched from talking

about ourselves in terms of months where I think two years is when you do

it for a baby, when you do it for a company.

Before that, another site which is a broader application of the idea

of Groupon.  It was called “The Point,” and it was a way for groups of

people to come together and organize action, whether that action is

boycotting a company or organizing a rally or fundraising or organizing

some kind of group discount.

And there was this big idea around trying to solve the world’s

unsolvable problems, but it was too abstract and complex.  So we said let’s

take one application of that, group buying, and focus on that and see what

happens.  So we started it as this side project.

CHARLIE ROSE: So “group buying” and “coupon” became one word.

ANDREW MASON: Yes.  So the idea is every day we feature one local

business — it could be a restaurant, it could be theater tickets, it could

be a spa — and we offer a big discount — 50 percent off or more.  But in

order to get that discount, a minimum number of people need to join.

So that way, the business knows they’re getting a large number of new

customers.  And for that they’re willing to offer this big discount.

So we played around with the idea in Chicago for about five or six

months before we launched our second city.  And then we launched a third

city and a fourth city, and before we knew it now we’re adding 30 cities a

month or so.  We entered 2010 in one country.  We’re now in 35 countries,

adding four more just last week.  And we’re up to actually — you said 35

million, but it’s actually 40 million subscribers.

CHARLIE ROSE: There’s 40 million now, yes.  And how fast are you

growing in terms of subscribers?

ANDREW MASON: We added three million last week.

CHARLIE ROSE: Three million last week.  How many were you adding per

week at the beginning of this year, in 2010, in January and February of

2010?

ANDREW MASON: Maybe 100,000.

CHARLIE ROSE: And you added three million last week, three million

new subscribers.  And the reason is?

ANDREW MASON: Well, it’s solving a real problem for lots of different

types of people.

CHARLIE ROSE: Especially local business.

ANDREW MASON: Yes.  Local businesses have never had a great way to

get customers in the door.  There is this term –

CHARLIE ROSE: They’ve never been crazy about Internet advertising.

ANDREW MASON: No, because they don’t know how to make it work.  They

don’t know how to make non-Internet advertising work.  They kind of do it

because they feel like they have to.  But 99 out of 100 businesses that put

an ad in the paper end up feeling disappointed about it.  They can’t

measure the returns, and to the degree they can they feel like it was a

disappointment.

So what Groupon does is — it’s for the first time local businesses

get performance-based marketing.  They only pay when these customers walk

in the door.  We get them in the door and then it’s up to them to give them

an amazing experience.

So we’ve put all these small kind of niche businesses on the map,

whether it’s a — whether it’s a helicopter club that’s offering flying

lessons, and we sell 2,500 coupons –

CHARLIE ROSE: That’s an extraordinary story.  Tell the story.  In

terms of the people at the helicopter club who were offering lessons, all

of a sudden they were expecting 20?

ANDREW MASON: They were expecting maybe a couple hundred or so.  And

we always try and prepare them and say this could be huge.  Don’t be

surprised if we sell 1,000.

CHARLIE ROSE: And how many did they get?

ANDREW MASON: We sold 2,500.  And in the history of this business

that’s been around for two decades — or two-and-a-half decades –

CHARLIE ROSE: Helicopter flying lessons.

ANDREW MASON: Yes.  This business had brought in a total of 5,000

customers.  So in one day we increased their — we did as much as half of

what they did in the previous quarter century.

CHARLIE ROSE: And it happens because there is a thirst for value and

bargains and a sense that –

ANDREW MASON: More than that, I think.  I think it’s a thirst for

life.  It’s a thirst for experiences.

CHARLIE ROSE: It’s a buying experience they like?

ANDREW MASON: They like getting out of the house and flying a

helicopter or going skydiving or whatever it is.

CHARLIE ROSE: Are these things that they might not otherwise have

thought about?  That they didn’t know there was this kind of bargain?

ANDREW MASON: Yes.  I think — I think that’s what it is.  I think

the discount is this great trick that we’re playing on people, because

we’re tricking them to get out of the house and live their lives, because

it’s there for one day.

It’s like “I’ve always wanted to go skydiving.  If I’m going to do it,

I might as well do it now because it’s never going to be cheaper.” So we

finally get people to commit and get off the couch and go out and have fun.

CHARLIE ROSE: And then you split the profits 50-50?

ANDREW MASON: Yes.

CHARLIE ROSE: Are most people happy with the results?

ANDREW MASON: Yes.

CHARLIE ROSE: Like 90 percent or 70 percent?  Or –

ANDREW MASON: We survey all the businesses we feature, and 95 percent

say they want to be featured again.

CHARLIE ROSE: There are also is this advantage.  It’s an advertising

model for them, a promotional model.  Even if they don’t make any money,

their company is seen in a certain light of attention.

ANDREW MASON: Right.  So we send out free an email the exclusive

subject of which is this business, and we do this fun write-up that people

read even if they’re not interested in buying the deal.

And in a city like Chicago that goes out to a million people, which is

larger than the circulation of “The Sun-Times” and “The Tribune” combined,

so it’s amazing exposure for these small businesses.  There is this term

“the hidden gem” that we use to refer to small businesses, and I think of

it as a nice way of saying someone who is great at their craft but just

sucks as a marketer.  And we want to squash that whole concept.  We want to

make sure that if there is someone out there –

CHARLIE ROSE: You want to do the marketing for them?  Which is it?

ANDREW MASON: We want to squash the concept of the hidden gem.  If

you have a great business, if you’re great at your craft people should be

coming in there.  It shouldn’t be this secret.

CHARLIE ROSE: Oh, I see.  We want to expose great ideas.

ANDREW MASON: Right.

CHARLIE ROSE: Or businesses that have something to offer to you.

ANDREW MASON: Right.

CHARLIE ROSE: Competition — everybody says that one of the issues in

terms of your future is that you have already begun to see a whole class of

imitators.  It is a serious form of flattery, but does it worry you?

ANDREW MASON: There has been something like 500 Groupon clones.  And

it’s been very strange.  The first one came around in April of 2009 or so,

and I remember seeing it and just being amazed that someone would copy what

we were doing exactly, like the layout of the site, the copyrighting we

were doing.

But getting over that, I think the proof is in the numbers.  We’ve

just tried to stay focused on building a really great product for people

and now, with 500 clones, 499 of them are relevant.  We still maintain a

really great lead and I think it’s because we really focus on creating

great product –

CHARLIE ROSE: But is this the lead of simply experience or is it the

lead of writing code and technology and software?

ANDREW MASON: I think — it’s all of those things.  It’s having a

consistently great experience for our customers and merchants.

I think that people — at least on the Internet, because I think about

this a lot — these companies that have these huge ramps.  We’re not the

first.  Maybe we’ve done it a little bit faster, but that’s largely a side

effect of the world in which we live where there are these social media

channels lying Facebook and Twitter that allow ideas to propagate much

faster.

But I think about what calls these Friendsters or the MySpaces to

collapse.  And it’s usually those companies losing to themselves.  They

lose their sense of focus.  Maybe they’re too focused on the competition or

they’re off doing interviews with Charlie Rose instead of working on

growing their business.

CHARLIE ROSE: Please, do not say that.

(LAUGHTER)

ANDREW MASON: But I think as long as we continue to look at what our

customers and our merchants want and be as fanatical about that as we were

when we started the business, then we’ll be in pretty good shape.

CHARLIE ROSE: So focus is what those that don’t excel, or those that

lose their meteoric rise, it’s focus.  They forget –

ANDREW MASON: What’s important.

CHARLIE ROSE: What’s important.  They forget why they got to the

place that they are?

ANDREW MASON: Maybe.

CHARLIE ROSE: So what’s the future of Groupon, other than countries

that you haven’t tapped, cities that you haven’t been to?

ANDREW MASON: Self-driving cars.  We’re going to get into that.

Beyond that –

CHARLIE ROSE: What’s a self-driving car?  Although I know there’s

been a little bit of talk about it, but tell us.

ANDREW MASON: That’s actually all that I know so far.

(LAUGHTER)

But I know that I want to do it.

Beyond that, we think there is really an opportunity for a company to

come along and change the way that people buy from local businesses in the

same way that sites like Amazon have changed the way people buy products.

CHARLIE ROSE: Right.

ANDREW MASON: And we want to try to be that company.  We think we’ve

scratched the surface.

CHARLIE ROSE: So you’re the savior for small business in the world.

ANDREW MASON: We’re the savior for small businesses.  For consumers,

we want to reverse this trend of spending more and more time on the

computer and help people rediscover their cities.

And as far as the company goes, I think we want to build a company

that, as we get bigger, we stay honest to the brand and the corporate

culture that made us a cool place to work and made people like us when we

were small, and hopefully create some examples of how you don’t have to be

like every other company even when you’re a big one.

CHARLIE ROSE: And so the reputation is such now that merchants, when

they hear you calling, are thrilled.

ANDREW MASON: Yes.

CHARLIE ROSE: And they’re lining up calling you as well.

ANDREW MASON: We have backlogs sometimes six months long in our

cities.

CHARLIE ROSE: Saying, “me, me, me”?

ANDREW MASON: Yes, businesses calling us and –

CHARLIE ROSE: Do you shape the deal?

ANDREW MASON: We work with them to shape the deal.  And it’s our

biggest problem.  For every business we feature, we have to pass on seven

businesses.  That’s how much the demand is, because we the self-imposed

limitation of one deal a day that we think is important.  And that’s what’s

led to the –

CHARLIE ROSE: Why is that so important, one deal a day?  Why not one

deal an hour?

ANDREW MASON: I don’t know.  Maybe one deal an hour would work too.

But the reason that we’ve stuck with this one deal a day model is the

focus.  It puts the merchant in the spotlight and makes it feel really

special, and it makes a really simple yes-no decision for consumers.

I mean, I think it’s one of the things that differentiates us from the

coupon and deal sites that came before where there was just this list of

deals, and it’s overwhelming and everything feels cheap.  But we can really

make these really special businesses feel special by making them the

exclusive subject of our site for a day.

CHARLIE ROSE: There is this old idea, and people have spoken to it

for a long time — somebody once asked Bill Gates at the height of

Microsoft’s popularity what did he fear most.  And he said, “I don’t know,

but it’s two people somewhere in a garage working on something I’ve never

heard of.” That’s what he feared.

What is it about this?  Is this the story of that — of you and Eric,

you know, that sort of cofounder and the guy who has been very successful

at backing success?  Is that what it was?  Was it two guys who just had an

idea, or two guys that was right?  Or were you two people who were looking

for the next break?

ANDREW MASON: In terms of fear, I still am most afraid of Freddie

Kruger.

(LAUGHTER)

CHARLIE ROSE: Yes.  Shaped by your childhood, were you?

ANDREW MASON: Yes.  I mean, he’s still scary.  But with the company,

I think what we were trying to do is find a way to create a company that

changes the world somehow.

CHARLIE ROSE: Changes the world?

ANDREW MASON: Yes.

CHARLIE ROSE: You really — you had that thought, let’s create

something that can change the world, rather than what might work and what

might do some — here is a good idea.  If we can somehow tap into showing a

whole new set of people that small businesses can give them an experience

and a bargain, that’s not changing the world, that’s sort of saying –

that’s a business?

ANDREW MASON: Yes, let me elaborate.  So when I started the point, I

was originally in grad school and I had –

CHARLIE ROSE: That had a different purpose.  That was to raise money

for a social cause.

ANDREW MASON: Yes, that had a purpose.  And that idea and other

things I have done in the past has almost been like a burden.  You feel

compelled, you have this idea, you have the responsibility to go out and do

something with it.  So I think that’s what got us started.

And then the pivot to Groupon wasn’t expected by anyone, including us.

I mean, I think we started it as a side project, and it was like, here’s

this is cool.  We didn’t think we were going to start this billion dollar

business.

CHARLIE ROSE: Here is a cool thing we could do for a group of people

who are part of a social network.  And rather than raising money we’ll show

them bargains.

ANDREW MASON: Right, exactly.  And for — it seemed great from the

perspective of the consumer.  Here is a way to find cool things to do in

Chicago.

But what took us by surprisingly the positive effect it was having on

businesses, because we didn’t come from a background where we knew a lot

about the trials and tribulations of running a brick-and-mortar business.

But it’s really hard for them to get new customers and we ended up doing

that better than anybody else in the world.

So when we got our — when we saw that, it allowed us to really dig

in.  And I think that continues to be what drives us, is that we’re here to

help.  We’re — I mean, remember, our DNA are people who started this

thing, who started a company because we wanted to — because we wanted to

change the world and make it better.

CHARLIE ROSE: What does it say about where the Internet is today and

where social networking is today and where mobile is today?  Tell me.

ANDREW MASON: I think what it says is that there is this plumbing

that’s been laid, like within the tubes.

CHARLIE ROSE: Right.

ANDREW MASON: That’s the social graph that exists through tools like

Facebook and Twitter, and it just allows companies to grow at a rate that

is unprecedented.

And I think when people call us the fastest growing company ever, I

think of us as like the N-Sync of websites, like we have had good tunes,

but we’re not The Beatles.  It’s not like we’re the best thing ever.  But

our success and the amount of money we’ve made is largely because of the

environment that we’re growing companies in.

So I think that we’ll continue to see more companies like us who make

us — who put us to shame a couple years from now with their rate of

growth.

CHARLIE ROSE: What might be happening in five years?

ANDREW MASON: I mean, I think we’ll feel like we have been successful

if five years from now, you don’t have the same experience that you have

today where you walk down Main Street and 80 percent of the businesses are

empty.  If we can do a better job at managing — managing supply for small

businesses so that there are more people out there and less kind of

inventory going to waste constantly, so if we can bring that same kind of

really smart inventory management that exists with — for Amazon or for

Wal-Mart to every mom-and-pop shop, then that’s an exciting thing to be

working toward.

CHARLIE ROSE: And so what does Facebook and Twitter mean to you?

ANDREW MASON: It’s a great way to — well, first of all, Groupon is

an inherently social service because the content is social.  It’s

restaurants.  It’s theater.  It’s stuff that you do with friends.

CHARLIE ROSE: Today in New York it’s yoga lessons.

ANDREW MASON: Yoga lessons, which people do with friends.  I’m sure

you do yoga with friends.  And when people get that yoga deal, they send it

to somebody else and they say “Let’s both get this and let’s go together.”

So Facebook and Twitter are ways for people to spread the word on

these things that never existed before and they make it easy for companies

like us to exist.

CHARLIE ROSE: So if someone listens to this and says, man, I want to

try this, what do they do?

ANDREW MASON: “I want to try Groupon”?  Go to http://www.Groupon.com.  You

type in your email address and then you start getting the daily deal every

morning.  And then if it looks like something awesome that you want to do,

you buy it.  If it looks stupid, then you delete it, if it looks stupid for

like three or four days in a row, then you unsubscribe.

CHARLIE ROSE: And say Groupon is not for me.

ANDREW MASON: Yes, it’s not for you.  But hopefully that won’t

happen.  One of the great things about Groupon is that every day we’re

featuring businesses that have never — not only have they never run a

discount before, they’ve never advertised before, like world renowned art

museums, James Beard award-winning restaurants.  We found a way to make the

coupon cool.

CHARLIE ROSE: Tell me the museum story.

ANDREW MASON: We featured — the first museum we ever featured was

the Art Institute of Chicago.

CHARLIE ROSE: Right.

ANDREW MASON: We did half-off memberships.  So normally $80.

CHARLIE ROSE: They got, like, 5,000 new members?

ANDREW MASON: Yes, 5,000 new memberships and that increased their

overall membership base by — I forget the number.  It was like six, seven,

eight percent.

CHARLIE ROSE: What was the offer?

ANDREW MASON: The offer was half off a membership.

CHARLIE ROSE: And then where did you cut that off?  Everybody that

wanted that got it?

ANDREW MASON: Everybody that wanted it got it.

CHARLIE ROSE: And so therefore every art organization in Chicago

wants a Groupon experience?

ANDREW MASON: We did memberships to the Joffrey Ballet in Chicago

recently and increased their membership base by 30 percent or something.

CHARLIE ROSE: So Google comes along.

ANDREW MASON: I mean, there has been a lot of stuff written in the

press about it.  Unfortunately, I can’t speak to it in any way.

CHARLIE ROSE: Suppose you had made that deal.  Suppose a deal like

that — what would you do?  What would be the advantage for you to make a

deal like that?  Not Google, not the deal that was there offered, whatever

it was, $6 billion or whatever it might have been, what would have been the

advantage?

ANDREW MASON: Here is what I can say.  I think every choice we make

in the company comes down to a core of this idea we have of what Groupon

could be and the place it could play in the world and in the rest of the

21st century.

And every choice we make is which option will it make it more possible

for us to get there?  So I think whatever we decide to do with the company,

the people that we hire, the deals we run, every itty-bitty choices, how do

we build this company into something that transforms the way people buy

from local businesses.

CHARLIE ROSE: So the only question you would have whether you accept

an attractive offer from someone, or you continue doing it like you are, or

whether you would go public and raise money is, which means would help us

get to where we want to be?  That’s it?

ANDREW MASON: That’s it.

CHARLIE ROSE: So therefore, why did you choose to eliminate a Google-

like proposition and incline yourself toward other propositions?

ANDREW MASON: It has to do with whether or not I would beat my wife.

CHARLIE ROSE: No, it doesn’t.  This is a thing you use.  I know about

this tactic, so I’m prepared for it.  So — you know what I’m asking.

ANDREW MASON: I know what I’m asking.  You know I can’t answer.

(LAUGHTER)

CHARLIE ROSE: A boy can try, can’t he?

ANDREW MASON: It is amusing.

CHARLIE ROSE: It is amusing.  But here is another take at this.  Were

you influenced by decisions that Facebook had made?

(LAUGHTER)

ANDREW MASON: I can’t talk about this, Charlie.

CHARLIE ROSE: But I don’t understand why you can’t talk about it.

ANDREW MASON: You can’t talk about all kinds of things, largely

because — for the same reason that every person you go on a date with, you

don’t bring them home to your parents right away.

(LAUGHTER)

CHARLIE ROSE: That’s a perfect answer.  That’s all I’m looking for.

It’s great to have you here.  Thank you very much.

ANDREW MASON: Thank you for having me.

CHARLIE ROSE: Groupon is just a great story.

ANDREW MASON: It’s great to be part of it.

CHARLIE ROSE: Yes.  Thank you.

ANDREW MASON: Thanks for having me.

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