Ok, So Maybe Greed Is Groupon, But The Much Bigger Issue Is The Product

A lot of people are talking about management issues at Groupon, but maybe daily deals just aren’t that big of a deal. The Verge yesterday posted a lengthy look at what went wrong at Groupon, the e-commerce business that recently outsted its CEO and founder Andrew Mason after reporting another disappointing quarter. Basing the story on interviews with a “dozen current and former employees, executives, investors, and board members,” the Verge’s conclusion seems to be that one of the biggest problems for the company was its management — or mismanagement, as the case may be. “Greed is Groupon,” the article’s title proclaims.

Yes, there are enough proof points in the story, along with feedback from others close to the company, to paint a picture of intentions gone horribly wrong — and yes, we hear similar descriptions especially on the international front. Yet I think the Verge also missed a bigger point, and did not ask the bigger question: did (does) Groupon actually have the right products to be a winning company?

Groupon’s main business, pre-IPO and today, is daily deals — offering a way for merchants and businesses to better manage their yield by creating discounted offers for things to fill in gaps in service-led businesses, a concept later extended to goods as well. This was, undeniably, a very active business in the years leading up to Groupon’s IPO. It got a lot of investors very interested in the company, and banks created big projections for how that business would grow.

But at the same time, something else started to happen. Consumers and some businesses actually cooled off from the idea. Some of that had to do with poor product experience, but there was also a general sense that this was more a fad than a permanent fixture of the e-commerce game. It even picked up a term: “daily deal fatigue.”

It didn’t help that Groupon’s wild rise spawned hundreds of clones, along with some bigger competitors like LivingSocial, to further flood the market. And therein lies the problem: as much as Groupon may not have handled its own growth well — and perhaps continues to mishandle it in some regards (eg if you think having a single IT platform for all subsidiaries can make or break a business) — the fact that its competitors also have faced a lot of problems speaks a lot more about the state of Groupon today than Groupon’s management foibles do.

Of course, Groupon is still the leader in its market. Daily deals in the last quarter grew by 300% over last year and will be the engine that will take Groupon, as Verge points out, to a projected $6 billion in revenues this year (profit is another story). But as for how the business will grow going forward, management issues and leadership changes may be moot points. The problem is that the products and strategy post-Mason are the same as before.

Yes, Groupon has moved beyond the daily deal — following through on Andrew Mason’s concept, outlined in May 2012, to become “the operating system for local commerce.” That has included moves into mobile payments, point-of-sale solutions, hyperlocal offers on your mobile device, and more direct sales of products to compete against Amazon and other straight e-commerce players.

But as daily deals continue to trundle along, many of these newer services are offered outside of the U.S. (and international makes up more than half of Groupon’s revenues today). And if Groupon does manage to crack markets like mobile commerce, beating out the many incumbents plus companies like Square and PayPal, it will be some time before these services begin to yield big rewards.

And all the greed or generosity in the world won’t change that.