Groupon’s Social Network Problem

Groupon has already conquered the daily deals market–now they’re trying to take over all other deals, too. But they may be missing one big piece of the puzzle: a social network.

sale sign in store window


Groupon has already conquered the daily deals market–now they’re trying to take over all other deals, too. The Chicago-based discount startup just launched Groupon Now, a service that offers nearby deals on-the-go. Hungry on the way to work? Open up the Groupon app, which might suggest discounts on a burrito–along with other options for food, fitness, entertainment, and nightlife–all in a several block radius.

Groupon Now is sure to impress users–after all, the service is currently composed of $1 deals on everything from concerts to yoga classes. But for merchants–the intended beneficiaries of the service–Groupon Now is missing a huge component: a social network.

Competitors in the deals space already offer similar features as Groupon Now, but with a social layer built on top. Launch up Foursquare, for example, and you can find any number of nearby rewards and deals. The same goes for Facebook. But using these deals is an inherently social process, and will more often than not correspond with a check-in or status update.

In other words, deals on Facebook and Foursquare are more likely to be shared, turning a routine discount on coffee into an advertisement for a local merchant that flutters out into one’s social network and brings in more potential business. On Groupon, the butterfly effect is not present–it’s a personal purchasing decision that looks to go unshared. Groupon’s ad for the service perfectly captures what we’re talking about: A consumer walking alone down the street checks out a deal. No big groups of friends filling up the burger joint’s seats–just a one-on-one interaction between consumer and merchant.


Groupon has managed to get by so far without a social network: The steep discounts and nature of their group deals were enough incentive for the service to spread to friends by word of mouth. But Groupon Now, which is made up of deals you have to jump on immediately, loses that edge–users won’t have time to get their friends involved for spur-of-the-moment purchases.

Solution? Groupon needs to push out more social features for the service to be worthwhile for merchants.

Or, heck, the company could use some of its nearly $1 billion funding to purchase Foursquare or GroupMe. Looks like we aren’t alone in thinking like this.

[Image: Flickr user Gerard Stolk]

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Read More: Most Innovative Companies: Groupon


About the author

Austin Carr writes about design and technology for Fast Company magazine.