If you are a struggling business hoping that your social coupon offer may be the lifeboat it needs, consider this: You may be jumping from the Hindenberg onto the Titanic.
In the media’s eyes, social coupon sites have gone from sparkling pillars of a new ecomomy to billowing factories of smoke and mirrors. So, wherein lies the truth? Granted, Groupon and LivingSocial’s fortunes are immense. But so is the quantity of cash they are hemorrhaging. (This, for companies with no warehouses, inventory or distribution?) The sad truth is, social coupon sites are not out to fuel your growth, but theirs. The very reason social coupon sites are burning cash–your cash–at such a staggering rate is that acquisition costs of new customers are skyrocketing and revenue is plummeting. If Groupon or LivingSocial were in the same business as you, wouldn’t they be out of business by now?
In this age of hyper-targeted marketing, social coupon sites are still using a blunderbuss to hit a fly. Although Groupon has recently attempted modernizing itself with geo-targeted deals such as Groupon Now, most users get the same offer as every other Groupon subscriber in their city. Which means Groupon is basically in the business of delivering digital junk: Untargeted, uninterested individuals receiving unopened, unwanted offers. Sure, everybody likes a great deal. But how great is half-off Brazilan waxing offered to my grandmother on the other side of town? (Sorry, Grandma).
In many ways, Groupon is applying the ancient media principle of “tonnage” to making sales. It is spending truckloads of cash to deliver a horse and buggy solution–noncustomized email–to reach tiny groups of consumers inefficiently and ineffectively.