reDesign

October 24, 2011

Think Groupon is a technology company? Think again.

Filed under: daily deals, groupon — Rakesh Agrawal @ 6:08 pm

Through much of its roadshow presentation, Groupon tries to make the claim that it’s a technology company. At one point, CEO Andrew Mason bizarrely uses a cyborg to illustrate how much the company is about technology. From a company perspective, that makes sense: technology companies get much higher valuations than other companies. But investors should think twice.

Here’s why:

Only about 5% of Groupon employees are in technology.

Only about 5% of Groupon employees are in technology.

According to Groupon’s latest S-1, only 5% of Groupon’s more than 10,000 employees are in technology. That ranks below “Unspecified.” The only group within the company that is smaller is city planners, who are responsible for scheduling deals.

To make matters worse, earning additional revenue requires a corresponding increase in employees. The size of departments such as editorial, sales, merchant services and customer service should grow in line with revenue increases. In its third quarter, revenues grew 9.6% and overall headcount grew 8.2%.

The company is already more than three times the size of Facebook in terms of employees.

Although two of the executives in the roadshow presentation tout their Amazon credentials, comparing Groupon to Amazon is a big insult to Amazon. The latter has invested in core technologies and infrastructure that have become the core of many Internet sites, including EC2 and S3. Although others invented cloud competing, Amazon has done more than anyone else to democratize and popularize it. Amazon invented Kindle and made e-books mainstream. It continues to innovate in supply chain and logistics.

Besides, the core problem in local is not a technology problem: It’s the reluctance of many small businesses to use Internet technologies. That’s a problem hundreds (if not thousands) of companies have wrestled with for 15 years now. Many companies have built self-serve platforms that few businesses used. Groupon’s innovation was to strip away the requirement for the business to use a computer, make Internet advertising less targeted, less efficient and more expensive — expensive enough that it could afford to pay a sales force.

But that’s a bridge at best. Eventually, probably in 3-5 years, businesses will use the Internet more for marketing. Once that problem is solved, real technology companies with massive built in distribution like Google and Facebook will dominate the space.

There are some technology intensive problems in local, such as mapping, routing and imagery. But those are mostly being tackled by Google and Microsoft; other companies (including Groupon) incorporate them in to their own products through APIs.

As further evidence of its technology expertise, Groupon touts its SmartDeals targeting engine.

I’ll believe that they’ve invented a great targeting engine when I stop getting deals for mani-pedis and The Body Shop.

About these ads

45 Comments »

  1. Rocky, what is your estimated date of death of Groupon? Based on every piece you have written to me they might have two years left (I am being generous) before the Feds step in and either shut them down or Groupon hears the feds are coming and just fall…sort of like Enron.

    Respectfully yours,

    Roger J. Hourihan, BS, AS, ATA, ATP

    Comment by Roger J. Hourihan, BS, AS, ATA, ATP — October 24, 2011 @ 6:16 pm

  2. Well broken down argument. I feel like Groupon is trying to be something their not, and the insecurity is written all over the company’s statements and PR campaigns.

    Comment by William Jimenez (@wjimenez5271) — October 24, 2011 @ 6:55 pm

  3. Not a convincing argument. One could say that Groupon is using technology more efficiently.

    Comment by Darin — October 25, 2011 @ 5:52 am

    • Technology is efficient if it removes the need for salespeople — Groupon’s doesn’t remove any need; in fact, its lack of technology means that it doesn’t pre-qualify leads, leading to a wide funnel, leading to the need for more and more salespeople.

      Comment by Facts — October 25, 2011 @ 9:49 am

  4. Skeptical as I am about the bout of Groupon-bashing that’s been going on in the press for a while, I can’t help but snicker at the thought that Mason managed to convine people that a company that sends out daily spam to a mailing list is in fact a ‘technology’ company.

    Comment by Fawaz N — October 25, 2011 @ 7:52 am

  5. “Besides, the core problem that Groupon is trying to solve is not a technology problem: It’s the reluctance of many small businesses to effectively use Internet technologies.”

    False. The core problem is that it’s difficult for an individual small business to get eyeballs now that nearly everyone is doing stuff online. Even a small business doing everything right is competing with a thousand others.

    You’re correct that it’s not a technology problem; you’re incorrect that it has anything at all to do with a failure to “effectively use Internet technologies.”

    Comment by Michael — October 25, 2011 @ 9:52 am

    • Replying to myself to clarify: Saying Groupon exists to overcome “the reluctance of many small businesses to effectively use Internet technologies” is like saying that someone buys a billboard because they’ve failed to use newspaper advertising effectively. It’s just another mechanism to gain exposure.

      Comment by Michael — October 25, 2011 @ 9:54 am

  6. [...] reDesign. Share and Enjoy: カテゴリー: Web   作成者: TTKMNT パーマリンク [...]

    Pingback by GROUPONはテクノロジーカンパニーか? | TTKMNT — October 25, 2011 @ 4:45 pm

  7. [...] does Groupon mat­ter to me? Rocky Agrawal (from reDesign) pre­sented a chart of Groupon’s employee mix–all 10,000+ of them. What popped out at me was 3 [...]

    Pingback by Planning Jargon » Sorry City Planners, Groupon Isn’t Really Looking For You, Per Se — October 26, 2011 @ 6:58 pm

  8. Maybe the company should re-title the city planner position to more accurately reflect what that job actually entails.

    Comment by PJ — October 26, 2011 @ 7:04 pm

  9. [...] both Groupon and Zynga count themselves as technology companies. But, in the case of Groupon, if you’re in Rocky’s camp, then the company may not even be worthy of the title, in spite of CEO Andrew Mason’s [...]

    Pingback by Groupon Vs. Zynga: Which Company Will Be More Valuable Post-IPO? | TechCrunch — November 4, 2011 @ 12:08 am

  10. [...] both Groupon and Zynga count themselves as technology companies. But, in the case of Groupon, if you’re in Rocky’s camp, then the company may not even be worthy of the title, in spite of CEO Andrew Mason’s [...]

    Pingback by Groupon Vs. Zynga: Which Company Will Be More Valuable Post-IPO? | Technology Blog — November 4, 2011 @ 12:12 am

  11. [...] both Groupon and Zynga count themselves as technology companies. But, in the case of Groupon, if you’re in Rocky’s camp, then the company may not even be worthy of the title, in spite of CEO Andrew Mason’s [...]

    Pingback by Groupon Vs. Zynga: Which Company Will Be More Valuable Post-IPO? | New Brighton News — November 4, 2011 @ 12:26 am

  12. [...] both Groupon and Zynga count themselves as technology companies. But, in the case of Groupon, if you’re in Rocky’s camp, then the company may not even be worthy of the title, in spite of CEO Andrew Mason’s [...]

    Pingback by Groupon Vs. Zynga: Which Company Will Be More Valuable Post-IPO? | HotFuzz — November 4, 2011 @ 12:29 am

  13. [...] both Groupon and Zynga count themselves as technology companies. But, in the case of Groupon, if you’re in Rocky’s camp, then the company may not even be worthy of the title, in spite of CEO Andrew Mason’s repeated [...]

    Pingback by Groupon Vs. Zynga: Which Company Will Be More Valuable Post-IPO? | TechDiem.com — November 4, 2011 @ 12:32 am

  14. [...] both Groupon and Zynga count themselves as technology companies. But, in the case of Groupon, if you’re in Rocky’s camp, then the company may not even be worthy of the title, in spite of CEO Andrew Mason’s [...]

    Pingback by Groupon Vs. Zynga: Which Company Will Be More Valuable Post-IPO? | Chanhassen News | Chanhassen Local News — November 4, 2011 @ 1:08 am

  15. [...] both Groupon and Zynga count themselves as technology companies. But, in the case of Groupon, if you’re in Rocky’s camp, then the company may not even be worthy of the title, in spite of CEO Andrew Mason’s [...]

    Pingback by Groupon Vs. Zynga: Which Company Will Be More Valuable Post-IPO? | Chaska News | Chaska Local News — November 4, 2011 @ 1:16 am

  16. [...] both Groupon and Zynga count themselves as technology companies. But, in the case of Groupon, if you’re in Rocky’s camp, then the company may not even be worthy of the title, in spite of CEO Andrew Mason’s [...]

    Pingback by Groupon Vs. Zynga: Which Company Will Be More Valuable Post-IPO? – Get Opinion — November 4, 2011 @ 1:33 am

  17. [...] starters, both Groupon and Zynga count themselves as record companies. But, in a box of Groupon, if you’re in Rocky’s camp, afterwards a association might not even be estimable of a title, in annoy of CEO Andrew Mason’s [...]

    Pingback by Groupon Vs. Zynga: Which Company Will Be More Valuable Post-IPO? | — November 4, 2011 @ 1:45 am

  18. [...] both Groupon and Zynga count themselves as technology companies. But, in the case of Groupon, if you’re in Rocky’s camp, then the company may not even be worthy of the title, in spite of CEO Andrew Mason’s [...]

    Pingback by Groupon Vs. Zynga: Which Company Will Be More Valuable Post-IPO? — November 4, 2011 @ 3:42 am

  19. [...] both Groupon and Zynga count themselves as technology companies. But, in the case of Groupon, if you’re in Rocky’s camp, then the company may not even be worthy of the title, in spite of CEO Andrew Mason’s [...]

    Pingback by Groupon Vs. Zynga: Which Company Will Be More Valuable Post-IPO? | Bitmag — November 4, 2011 @ 4:07 am

  20. [...] both Groupon and Zynga count themselves as technology companies. But, in the case of Groupon, if you’re in Rocky’s camp, then the company may not even be worthy of the title, in spite of CEO Andrew Mason’s repeated [...]

    Pingback by Groupon Vs. Zynga: Which Company Will Be More Valuable Post-IPO? | My Blog — November 4, 2011 @ 4:33 am

  21. [...] both Groupon and Zynga count themselves as technology companies. But, in the case of Groupon, if you’re in Rocky’s camp, then the company may not even be worthy of the title, in spite of CEO Andrew Mason’s repeated [...]

    Pingback by Groupon Vs. Zynga: Which Company Will Be More Valuable Post-IPO? — November 4, 2011 @ 4:37 am

  22. [...] both Groupon and Zynga count themselves as technology companies. But, in the case of Groupon, if you’re in Rocky’s camp, then the company may not even be worthy of the title, in spite of CEO Andrew Mason’s repeated [...]

    Pingback by Groupon Vs. Zynga: Which Company Will Be More Valuable Post-IPO? « Breakfasthut — November 4, 2011 @ 5:38 pm

  23. [...] both Groupon and Zynga count themselves as technology companies. But, in the case of Groupon, if you’re in Rocky’s camp, then the company may not even be worthy of the title, in spite of CEO Andrew Mason’s repeated [...]

    Pingback by Groupon Vs. Zynga: Which Company Will Be More Valuable Post-IPO? | zero — November 6, 2011 @ 7:49 am

  24. [...] only five percent of Groupon’s total employees work in technology; the bulk of its human resources go toward efforts such as sales, editorial and customer service. [...]

    Pingback by Gilt Groupe is talking IPO. Should this be a tech story? — Tech News and Analysis — November 22, 2011 @ 2:15 pm

  25. [...] Malik once noted at it would be plain wrong to call Groupon a tech company. The proof sits in this post, showing how Groupon is made up of far more Sales people than there are tech people. Some attribute [...]

    Pingback by A Tech Blog » Cloud Sales Engineers needed — December 9, 2011 @ 11:52 pm

  26. Why isn’t there a legitimate “critic” in Silicon Valley for early-stage startups?…

    As someone who has been publicly more critical of companies than most in Silicon Valley, my take is: 1. It’s just not worth criticizing a company that no one has heard of. There are so many dumb ideas being tried out that if I spent time writing about…

    Trackback by Quora — December 12, 2011 @ 6:24 pm

  27. [...] you are a skeptic who believes Groupon is not a tech company and that its growth has screeched to a halt, the lawsuits could take a significant bite out of [...]

    Pingback by Are Groupon’s Lawsuits A Burden? — paidContent — April 3, 2012 @ 7:37 am

  28. [...] numbers from Groupon’s S-1 and created a chart in Excel that showed that despite its claims, Groupon is not a technology company: I think that chart took me all of 15 minutes from start to finish, a fraction of the time I spend [...]

    Pingback by Instagram understands a secret of Facebook’s success: Visuals | VentureBeat — April 9, 2012 @ 11:30 am

  29. [...] One of the most popular posts I’ve written about Groupon didn’t take days worth of research or analysis. I grabbed one set of numbers from Groupon’s S-1 and created a chart in Excel that showed that despite its claims, Groupon is not a technology company: [...]

    Pingback by Instagram understands a secret of Facebook’s success: Visuals | Simply Boundless Entertainment — April 9, 2012 @ 3:35 pm

  30. [...] and the importance of coding skills. In fact, Groupon hires lots of liberal arts majors because most of its jobs have no technology component. I can’t pick up the paper, any paper, anywhere, without reading about Apple, and Google and [...]

    Pingback by Chicago Tribune talks to Groupon chairman Lefkofsky; asks the wrong questions | VentureBeat — April 18, 2012 @ 12:15 pm

  31. [...] As I was walking around DC wearing my newly acquired LivingSocial  T-shirt, I encountered two people who stopped me to say they worked at LivingSocial. One was a dishwasher and the other a bartender at 918 F. And I gave Groupon flak for not being a technology company. [...]

    Pingback by LivingSocial attempts a more hands-on approach to local commerce | VentureBeat — May 24, 2012 @ 6:44 pm

  32. [...] As I was jogging all around DC donning my recently acquired LivingSocial  T-shirt, I encountered two folks who stopped me to say they worked at LivingSocial. 1 was a dishwasher and the other a bartender at 918 F. And I gave Groupon flak for not being a engineering company. [...]

    Pingback by LivingSocial makes an attempt a a lot more palms-on technique to local commerce | New htc phones 2012 — May 24, 2012 @ 6:51 pm

  33. [...] As I was walking all around DC donning my recently obtained LivingSocial  T-shirt, I encountered two men and women who stopped me to say they worked at LivingSocial. One particular was a dishwasher and the other a bartender at 918 F. And I gave Groupon flak for not being a technological innovation firm. [...]

    Pingback by LivingSocial makes an attempt a more hands-on strategy to regional commerce | Latest HTC Phones 2012 — May 24, 2012 @ 6:52 pm

  34. [...] As I was going for walks close to DC putting on my newly acquired LivingSocial  T-shirt, I encountered two folks who stopped me to say they worked at LivingSocial. One particular was a dishwasher and the other a bartender at 918 F. And I gave Groupon flak for not becoming a technology company. [...]

    Pingback by LivingSocial makes an attempt a more arms-on approach to neighborhood commerce | Cheap Samsung Phones 2012 — May 24, 2012 @ 6:53 pm

  35. [...] As I was going for walks about DC sporting my newly obtained LivingSocial  T-shirt, I encountered two people who stopped me to say they worked at LivingSocial. One particular was a dishwasher and the other a bartender at 918 F. And I gave Groupon flak for not becoming a technology organization. [...]

    Pingback by LivingSocial attempts a much more fingers-on method to regional commerce | Top HTC Phones 2012 — May 24, 2012 @ 7:17 pm

  36. [...] As I was walking around DC wearing my newly acquired LivingSocial  T-shirt, I encountered two people who stopped me to say they worked at LivingSocial. One was a dishwasher and the other a bartender at 918 F. And I gave Groupon flak for not being a technology company. [...]

    Pingback by LivingSocial attempts a more hands-on approach to local commerce | Simply Boundless Entertainment — May 24, 2012 @ 7:42 pm

  37. [...] As I was jogging close to DC sporting my recently obtained LivingSocial  T-shirt, I encountered two people who stopped me to say they worked at LivingSocial. One particular was a dishwasher and the other a bartender at 918 F. And I gave Groupon flak for not being a engineering organization. [...]

    Pingback by LivingSocial attempts a more hands-on approach to local commerce | laser-printer-toner — May 25, 2012 @ 4:14 am

  38. [...] As I was walking all around DC donning my recently obtained LivingSocial  T-shirt, I encountered two individuals who stopped me to say they labored at LivingSocial. A single was a dishwasher and the other a bartender at 918 F. And I gave Groupon flak for not getting a technological innovation organization. [...]

    Pingback by LivingSocial makes an attempt a more arms-on technique to neighborhood commerce | Latest iphone apps 2012 — May 25, 2012 @ 5:02 am

  39. [...] via Think Groupon is a technology company? Think again. « reDesign. [...]

    Pingback by What has Groupon done right. | Raw thoughts from Alex Dong — November 6, 2012 @ 7:19 pm

  40. […] Resources on What are Silicon Valleys most likely acquisitions in the next few years: http://blog.agrawals.org/2011/10/24/think-groupon-is-a-technology-company-think-again/ […]

    Pingback by What are Silicon Valleys most likely acquisitions in the next few years | Resume Rewriter Free — September 30, 2013 @ 2:39 pm

  41. […] Resources on Why isnt there a legitimate critic in Silicon Valley for early stage startups: http://blog.agrawals.org/2011/10/24/think-groupon-is-a-technology-company-think-again/ […]

    Pingback by Why isnt there a legitimate critic in Silicon Valley for early stage startups | Resume Rewriter Free — September 30, 2013 @ 6:56 pm

  42. […] Resources on What do I need to do before moving to Silicon Valley: http://blog.agrawals.org/2011/10/24/think-groupon-is-a-technology-company-think-again/ […]

    Pingback by What do I need to do before moving to Silicon Valley | Resume Rewriter Free — October 1, 2013 @ 12:42 pm

  43. […] If Groupon is smart, it will invest some of that IPO money in data analysis — it has relatively few employees in technology — and in marketing services for its massive sales force to […]

    Pingback by A field guide to surviving the shakeout in daily deals — GigaOM Research — October 18, 2013 @ 2:26 pm


RSS feed for comments on this post. TrackBack URI

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

The Silver is the New Black Theme. Create a free website or blog at WordPress.com.

Follow

Get every new post delivered to your Inbox.

Join 134 other followers

%d bloggers like this: