Groupon is already the leader of the pack when it comes to local deals .
By offering deep discounts to restaurants, shops and services in more than 80 markets, the two-year-old company is minting cash (it has been profitable for more than a year). Its success has inspired a raft of imitators, and helped the company draw in a $135m investment from Digital Sky Technologies earlier this year.
When businesses are featured on Groupon, they are slammed with an influx of new customers. It’s a happy problem to have, especially in tough economic times. But demand has overwhelmed Groupon of late, with as many as 700 local businesses a day wanting to offer Groupons. Now, chief executive Andrew Mason thinks he has found the solution — personalised deals.
Using information including gender, location and buying history, Groupon will be tailoring offers to individual users. Men, for example, will probably not get deals for discounted manicures anymore. Personalised deals are rolling out in six cities (Chicago, San Francisco, New York, San Jose, Seattle and Los Angeles). To develop the new algorithm, the company hired an engineer from Netflix, which is known for its recommendations acumen.
Personalised deals will also allow Groupon to offer multiple deals a day in the same market. Men might receive a different deal than women, and people downtown might get a different offer than those in the suburbs. “It solves our biggest problem, which is an overwhelming desire for businesses to be featured,” Mr Mason told us. “Now we can meet that demand by segmenting the market.”
In large markets there may still be a main deal of the day, with the personalised deal featured as a “side deal”. Additionally, allowing the ability to target by zip code means that a restaurant can spread out their offers over a few months, getting say, 500 new customers in ten batches, rather than 5,000 new customers all at once.
This is likely to accelerate Groupon’s already rapid growth. A private company, Groupon doesn’t release revenue figures. But sales are said to be in the hundreds of millions a year and growing fast.
Mr Mason began Groupon almost by accident. A political activism site he developed while in graduate school, The Point, caught on, and investors wondered if it had e-commerce applications. Mr Mason, based in Chicago, has managed to remain humble even as his company takes off (he showed up to our meeting in sandals).
But with this kind of momentum, he is not downplaying the potential of his company. “If Amazon represents the model for how e-commerce works for consumer goods, Groupon represents how e-commerce works for local businesses,” he said.