Groupon: the next big thing is collective buying?

Posted Dec 3rd 2009 3:00PM by Tom Taulli
Filed under: Small Business

While living in a big city has many advantages, there is actually the problem of having too much to do. The irony is that we often wind up going to the same places.

Well, the folks at Groupon have a solution. They've built a site that posts a cool deal every day (say a spa treatment or gondola cruise). To this end, the site focuses on top-quality offerings without the typical "gotchas."

Yes, each deal has a steep discount. However, there must be a minimum number of people who opt-in for it. The concept is called "collective buying."

Seems kind of simple, huh? Interestingly enough, this can be a rare thing in the ecommerce world.

In fact, as a testament to its service, Groupon was able to raise $30 million in capital this week. The investors include top players like Accel Partners and NEA.

Why the huge slug of capital? First of all, Groupon's idea can be replicated (even though there is patent protection). So it's important to build a strong brand and become the category leader. Also, it is expensive to cater to the needs of different cities (so far, Groupon is in 26 locations)

Something else: Groupon says it expects to generate a whopping $100 million in revenues over the nest 12 months (the company has been profitable since the summer). This is always something that gets investors happy, especially in the current environment.

Tom Taulli is the author of various books, including The Complete M&A Handbook.

Tags: Groupon, inthenews

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Reader Comments (Page 1 of 1)

12-15-2009 @ 1:32PM

bestblinds said...

Curious - It seems obvious that the idea Groupon is using can be replicated since there are a few companies out there doing something very similar http://dc.sowhatsthedeal.com/ for example.

What is it that Groupon can be protecting through a patent? Your article made the following statement. "Why the huge slug of capital? First of all, Groupon's idea can be replicated (even though there is patent protection)."