Is Groupon Doomed to Fail?

groupon logoDaily deals giant and one-time darling of Silicon Valley, Groupon, is having a hard time of it. An IPO in 2011 raised a whopping $700 million, apparently more money at the time than any US firm since Google. But more than four years after the flash deals specialist was valued at nearly $13 billion, there’s very little to celebrate.

In September, the firm announced over 1,000 job cuts as part of its ‘One Playbook’ plan to cut debt and kick-start growth. Its CEO has moved across to chairman and the firm is quitting several markets including Morocco, Panama, the Philippines, Puerto Rico, Taiwan, Thailand and Uruguay. In November the firm’s shares plummeted 27% after it forecast 2016 revenue of $2.75 billion-$3.05 billion, below analyst estimates.

So what went wrong? I’ve been chatting to analysts for a piece in IT Pro (Hong Kong) about this and the general consensus is that it shouldn’t have IPO’d when it did. IDC Retail head of Europe, Spencer Izard, told me that the firm simply can’t keep up with the demand for high quality deals on a daily basis, so it’s failing in turn to meet the insatiable growth demands of shareholders.

For Gartner’s Sandy Shen, it’s a vicious circle. Groupon is not coming up with consistently good deals, so customers are leaving. Merchants see these falling customer numbers and the fact that most are only after that one deal and aren’t returning, so they also lose interest.

For Miya Knights, global technology research director at Planet Retail, there’s simply too much competition for the firm these days, and not just from bricks and mortar stores, which have lowered their prices to match the web.

“Groupon was first to the flash deals party, but has certainly not been the last. The space it occupies has been filled with direct, global and local competitors that offer deals across a wide range of categories, like Wowcher in the UK. More niche, specialist deal sites, for hotels, holidays, and home furnishings etc. have also emerged to fill the space,” she told me by email.

“Groupon’s figures, however, show it still has a loyal customer base and that revenues are strong. It’s just that its business model is broken: it does not generate enough revenue from its daily deals, which is where the margin lies, and relies too heavily on selling goods at discount prices, where the margins are tiny.”

So is there any hope for the site? It’s now trying to rebrand as an online marketplace, but with the likes of Amazon and eBay also playing in that space, the future doesn’t look too rosy.

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Can Bitcoin Go Mainstream?

moneyWhat’s the future of Bitcoin? That’s what I’ve been trying to work out in my latest feature for IT Pro in Hong Kong. As always it’s a topic everyone seems to have an opinion on, although not many are prepared to stick their neck out too far.

The main issue is that most countries have adopted a “wait and see” approach to the crypto-currency, which puts it a bit in limbo. Very few have banned it outright – not even China or Thailand, as is commonly reported.

Usually in these cases, it’s merely restrictions rather than total prohibition that have been instituted.

For Frost & Sullivan analyst, Vijay Narayanan, IT leaders in public and private sector organisations could face “new challenges, responsibilities and opportunities” if the cryto-currency can establish itself.

“While corporates are likely to build upon the Bitcoin technology to deliver new products and services, governments may find new methodologies to execute its mission from a view point of a law enforcer and regulator,” he told me.

“Bitcoin, in the future, further could revolutionise the way firms conduct business. As Bitcoin as a form of payment is expected to mature, it is likely to create an ecosystem of firms that will support retailers and end consumers in storing, accepting and exchanging bitcoins as a mode of  barter of goods and services.”

However, he argued that for Bitcoin to go mainstream if must become more stable, and “resolve issues pertaining to trust and security” – only this will give the markets the confidence they need to adopt it more readily.

Quocirca founder Clive Longbottom agreed that the currency’s price volatility has been its undoing in the past, claiming that only those who value anonymity are really keeping it going from an end user perspective.

“Most governments are publicly trying to say that Bitcoin is a passing fad that will not last, while shitting themselves behind closed doors as to what crypto-currencies mean to global trade and how that can be effectively tracked, taxed and manipulated.  It is more than likely that there have been deep discussions between governments and central and global banks to try and find a way to control any spread of crypto-currencies, but obviously, without a completely different thought process behind it all, these will not get anywhere,” he told me by email.

“It is difficult to regulate something where there is no true controlling body as such and all transactions are controlled by an overarching network. It is too easy for people to bypass any controls, so transactional charges and banking charges cannot be easily applied. As such, I think that we will see a few poorly thought out and implemented attempts to put in place some level of control, which will fail – unless Bitcoin itself suffers more problems.”

As to the future – well I suspect that Bitcoin and digital currencies in general will fail in themselves to see the mass adoption predicted for so long, mainly because most people are perfectly happy with existing currency systems. Where it could become more popular is in countries which already have weak and volatile currencies, but I doubt this will give it the momentum it needs.

Whether something bigger and better – and easier for ordinary users to ‘grasp’ – will eventually evolve from these platforms, is the great imponderable.