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Groupon's FOMO playbook

Chess Move

The what: A TLDR explanation of the strategy

In Groupon’s first few years it grew faster than Google, Facebook, and Apple.

Hitting over $2B of revenue within 4 years of launch, it was dubbed the “fastest growing company ever”.

They even turned down several billion dollar acquisition offers in the process (including $6 billion from Google - oops).

The secret to their explosive growth was architecting inherent virality into the product experience.

Breakdown

The how: The strategic playbook boiled down to 3x key takeaways

1.  Create an urgent habit

For many people in 2010-2012, Jazz wasn’t the first thing they consumed in the morning. It was Groupon.

Groupon solidified itself as a daily habit by creating extreme time-bound urgency.

Here’s how it worked.

Each day, Groupon had a series of new irresistible offers: $17 Rihanna tickets. 50% off the local Pizza shop. $25 for $50 of clothing at Gap.

But offers would only materialise if a threshold quantity were purchased, e.g. your local Pizza shop would need 20 people to buy for it to be worthwhile to them.

The catch: Many offers had a limited quantity on top of, or equal to that threshold, (e.g. only 1500 Rihanna tickets available), so if you wanted to buy, you had to be quick. You couldn’t wait for the threshold to be met and then decide.

Offers that received early traction (within the first few hours) were more likely to reach their activation thresholds.

So, if you wanted your deal to go through, it was better to signal to others earlier in the day - adding another reason to check Groupon as early as possible.

To turn this urgency into a habit, Groupon leaned heavily into email marketing:

• Segmenting users by geography

• Emailing users when they were most likely to be online

• Making offers that were most relevant to their demographic makeup

• Increasing volume for engaged users further along the activation lifecycle

In 2011, Groupon was sending almost 5 billion emails per month (!!) to its list of over 115 million subscribers.

2. Socially-proven fun

If you’re choosing between 2 restaurants where one looks busy and the other completely empty, you’ll probably choose the full one.

People tend to weight the loss of making the wrong decision more than the gains of making the right decision. A cognitive bias known as 'Loss aversion'.

Consumers looking to minimise wrong decisions rely heavily on 'social proof'; the decisions of others.

Groupon leaned into this bias, putting popularity at the core of their product.

Every offer included a live counter of the number of people buying it.

This created a viral compounding loop:

People sign up for the deal → Live counter increases → Others see the deal getting popular and are more likely to sign up → Live counter increases

3. Shareable experiences

Groupon had 2 typical offers:

The first were experiences typically done with multiple people - restaurants, cafes, events, etc.

The second were unique experiences you wouldn’t normally do. Things like pole dancing classes or renting a monkey for a week.

These two offers were both inherently shareable:

The first type of offer encourages sharing with your immediate circle.

→ You see an offer for 50% off pizza, so you send it to your girlfriend, Mum, some group chats, and anyone else you'd want to grab pizza with. If they want to join you, they can buy the offer too.

The second type of offer encourages sharing with your social network.

→ Photos of you doing your horse ride in the Grand Canyon. An update to your blog* on how awesome skydiving was. The more unique the experience, the more likely users would share it online.

*Back in 2011 when blogging was still cool (let’s bring blogging back)

Groupon’s inherently viral product design turned their users’ group chats and social media feeds into free distribution.

Rabbit Hole

The where: 3x high-signal resources to learn more

Social proof in online deals↗

[21 minute read]

We see social proof everywhere - logos on a SaaS website, pictures of famous guests at a restaurant. But how well does it work, exactly?

This fascinating study uses Groupon as a case study to understand the psychology of social proof in value propositions.

Tell HN: Our experience with Groupon ↗

[3 minute read]

How do the numbers look on a Groupon deal, from the perspective of a skydiving business?

WAY more bookings, but lower margins. Still profitable?

This one’s for the napkin-mathletes.

How I built this: Groupon↗

[1 hour listen]

The story of Groupon’s meteoric rise and equally dramatic fall, straight from the primary source (Groupon’s founder).

2 highlights - (1) how Groupon started as an idea to use critical mass to impact social change, and (2) how founder Andrew Mason got fired as CEO.

That’s all for today’s issue, folks!

A question to ponder: What would it look like if TikTok / YouTube Ads / iOS App Store / [insert other high-volume consumer marketplace] adopted some of Groupon’s viral mechanics?

Thanks for being here.

— Written by Sheldon Bishop and Tom Alder.

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