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Groupon – harnessing web for group discounts

groupon-logoOne year old Chicago based startup is making headlines today. Groupon, a website that delivers sweet random deals to your email box each day has just raised $30 mil from Accel Partners, the venture capital firm behind Facebook and many other successful online businesses.

The idea is very simple - the Groupon team finds businesses willing to offer a deal if a certain number of people sign up and then features these deals one at a time on their website. If enough members buy in - everyone gets the deal, if not - no one gets it. The deals are mostly local service oriented discounts, e.g restaurants, museums, etc. The company started in Chicago but now offers similar service in 45 more cities around the US.

Groupon was founded by Andrew Mason of ThePoint. If you are familiar with the group action site you can quickly see the similarity between the two. ThePoint harnesses the powers of masses for social cause, Groupon does it to please the consumer in us. The difference? Groupon is now a profitable business and growing fast, ThePoint on the other hand… you can see it for yourself. This month monthly stats are 1.3 mil and 50K for the two domains (according to Compete).

The notion of using the buying power of masses is not new. A couple US companies have attempted to deliver, MobShop and Mercata (co-foundered by Paul Allen). Both shut the doors back in 2001. Later, in 2006, The Christian Monitor wrote about the trend picking up again, now in China. I wonder what is different this time.

The overall concept of “one deal a day” is somewhat similar to what Woot is doing with consumer products except that Woot doesn’t have any “must buy minimum” conditions - they themselves deal with the risk of underselling an unpopular product. What would it take for them to spin off another sub-domain to their Woot empire and start offering conditional group discounts on consumer products? My guess is that the limit doesn’t only add a safe cushion to the business, it also creates a certain appeal - “it is so hot, you can only get it if…”! I am giving the Woot folks a month. :-)

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