A Month Of Groupon Subject Line Headers

Here's what you see in your inbox, on a daily basis.  Remember, the email vendor community preaches "timely, relevant contacts".

• 53% Off Massage (that's better than two days ago).
• 55% Off Car Wash & Detail.
• Half Off Massage.
• Up To 60% Off Hair Packages.
• Up To 68% Off Rock Climbing.
• Up To 53% Off Corn-Maze Admission.
• 55% Off Facial.
• 66% Off Coffee-Preparation Course.
• Half Off Beads.
• Up To 54% Off Cooking Class.
• Half Off Housewares.
• Up To 79% Off Hot Yoga (good thing I didn't take advantage of the 69% off offer two weeks ago).
• Up To 55% Off Wood Fired Pizza.
• 51% Off Bicycle Tune-Up.
• Up To 71% Off Auto-Detailing.
• Up To 51% Off Tomato Battle (where you and your friends dodge having the vegetable/fruit thrown at you).
• Up To 63% Off Handyman Services (Again? It's the old-school catalog remail!)
• 54% Off Mosaic Art Lessons.
• Up To 53% Off Auto Detailing.
• Up To 54% Off Golf.
• 69% Off Hot Yoga.
• $10 For Burgers And Milkshakes.
• Up To 52% Off Segway Tours.
• 75% Off Furniture.
• Up To 67% Off Baseball Outing For Two (Minor League).
• Up To 51% Off To See Blink 182 Perform.
• 73% Off Oil Change.
• 52% Off Pilates Reformer Classes.
• 67% Off Photography Classes.
• Up To 63% Off Handyman Services.

Question for you, the email marketing expert:

• How would you attempt to make this more relevant to the end user?  Use the comments section to describe what your strategy would be, and how you would mitigate the revenue you would lose as you become more targeted and relevant.

Groupon SEC Filing Tidbits

By now, you've had an opportunity to thumb through the Groupon SEC Filing (click here to read it).

I want for you to digest this for a moment:

• 2010 Annual Revenue = $713,365,000.
• 2010 Annual Loss = $413,386,000.
• 2011 Q1 Revenue = $644,728,000.
• 2011 Q1 Loss = $113,891,000.
• Customers like Groupon.  Groupon loses money.  Retailers, on average, lose money.  Oh boy.

Now, I'm no Carnac the Magnificent.  But this seems to be headed in one of three directions.

1. Groupon blows up like Amazon.com, becoming a social commerce institution, redefining online and physical retail in the process.
2. Groupon blows up like Pets.com, and is talked about for a decade or more as a symbol of the social commerce bubble.
3. Groupon is blitzed by rampant competition, becoming something that didn't scale, but didn't fail, either (this is my guess).

Other Notes:

• 83,000,000 subscribers to-date, only 28,100,000 Groupons sold ... and only 15,800,000 customers (meaning about 2 sold per customer, weighted down by Spring 2011 blitz).
• Maybe $25 revenue per Groupon sold.  Keep doing the math ... about $50 per customer, to-date.  That's not a lot of cheese, folks.
• Company spent $241,000,000 in marketing in 2010.
• Company spent $179,000,000 in marketing in Q1-2011.  Just think about that one for a moment.  That's called "buying scale".
• If Groupon sends an e-mail every day to a subscriber, and there were a weighted average of 65,000,000 subscribers in Q1-2011, and 28,094,000 Groupons were sold, then the conversion rate of an e-mail campaign is (28,094,000) / (65,000,000 * 90) = 0.48% ... or one in 208 subscribers buy a Groupon.  In other words, that's a rate that is fairly consistent with many e-commerce brands, except that the AOV is, by definition, much lower.
• Gross Profit in Q1-2011 is about 41%.  It was about 39% last year.  That's less than the 50/50 share that is widely publicized.
• Pay attention to the marketing channels used by Groupon:  Search, Social Networking, Portal Ads, E-Mail Marketing, Affiliates, Television, Radio, and Print.  It's amazing how the social commerce mudheads cheerlead their channel, and yet, look at the traditional advertising channels used to drive a prospect to a social commerce brand.  Primary ad channels were Search and Social Networking, by the way.
• In Q1-2011, the company is spending about $8 in marketing cost to generate each Groupon sold.
• Marketing is 32% of revenue in Q1-2011 ... that number is a bit beefy, folks, though not terribly unusual (yes, social commerce experts, I get it, they're "ramping up" in an effort to "scale" prior to going public).
• 46% of revenue from North America.
• Customers are consistently around 20% of the subscriber base.  Keep that metric in mind, and pay close attention to it, going forward.  Subscribers will tap out in the next few years, in all likelihood, so growth must come from an increase in the conversion rate, or from complimentary products.
• If it truly costs $6 to $9 of marketing expense to acquire a customer, then it will take just one Groupon sold, plus/minus, to pay for marketing costs, after accounting for gross margin ... that's not unreasonable, folks.

Dear Catalog CEOs: Groupon / Google / Co-Ops / List Rental

First of all, if Google gets Groupon for $5 billion or $6 billion, I'd offer kudos to Groupon.  They are the smartest marketers in the room, you cannot deny that. 

Talk about monetization.  At 13,000,000 subscribers and a $6 billion dollar sale price, you're looking at $461 per e-mail address.  You are able to milk your e-mail subscriber list for, what, $0.15 per e-mail message, at 100 message per year, $15 per year, total?

Talk about monetization.  How does a start-up convince established businesses to give a $50 item to the customer for $25, and then convince the established business to give half of what's left (though I'm told that big brands cut better deals than this) to Groupon for access to their list of discount-craving fans?  How does a start-up convince an established business to accept $12.50 instead of $50.00?

Do you ever think about this?


Let's pretend that you, the Catalog CEO, took this idea to Abacus, or Experian, or Millard, or ALC, Merit Direct, Belardi/Ostroy, or any other catalog vendor.  Let's pretend that you told them to start a new division ... one where they recruit e-mail addresses, then they partner with catalog brands to offer fabulous discounts and promotions that are made available only to those on the e-mail list.

What would Executive leadership at Abacus, Experian, Millard, ALC, Merit Direct, Belardi/Ostroy, or any other catalog vendor say to you?

"You're nuts."

"E-mail addresses don't work as well as a physical name/address, we all know that."

"Who in their right mind would go for that type of revenue split when we sell you viable names for just $0.06 or $0.13 each?"

"We've got this new model for business names where the second name at a business works 14% better than a new name at a new business, and you can take that to the bank!"

"Your target customer won't sign up for those type of e-mail promotions, she wants a physical catalog in the mail."

"We tried e-mail list building back in 2001 and it didn't work."

And that would be that.

We need some encouragement!


Abacus/Experian/Millard/ALC/Merit Direct/Belardi-Ostroy/Other Co-Ops ... you are list organizations, right?  You work with my Catalog CEO clients, you sell them access to your lists, right?

Groupon sells my Catalog CEO clients access to their list, right?


So how is Groupon any different than you? They are your number one competitor, they are you!  They figured out a different way to monetize a list, to the tune of a potential sale price of $6,000,000,000.


Abacus/Experian/Millard/ALC/Merit Direct/Belardi-Ostroy/Other Co-Ops, would Google buy your business for $6,000,000,000?

Remember, Groupon does the same thing you do, they sell access to a list.

In other words, the key to success is out there, just waiting to be implemented.  Any one of our catalog vendors could have attempted the Groupon model before Groupon attempted it, and would have had an enormous head start, having already built a list of a hundred million names and addresses.  And the idea is completely congruent with the mission of a list rental organization like Millard, or a co-op like Abacus ... it's the same thing, with a different monetization structure.


This brings me to you, the Catalog CEO.  The future is out there, just waiting for us to capitalize on it.  All of the good ideas are out there already.  We have the ability to make magical things happen.  Our ability to make magical things happen decreases when we look within the same box of toys for our answers.  We have to be willing to take risks, measured risks.  Sometimes, we have to be willing to set aside our pre-conceived notions of "what will work".  Sometimes, we have to trust the 29 year old marketing analyst, giving her a chance to implement something that we strongly believe won't work.  When her idea doesn't work, we mentor her with compassion.  When her idea does work, we give her more responsibility.

Do not let some rogue startup take something that you invented, put a modern twist on it, monetize it differently, then run you out of business with a mashup of your business model and their idea.