Groupon was “the single worst decision I ever made as a business owner” – Rocky Agrawal, TechCrunch, Jun 2011
…Deals are scheduled based on factors that optimize the deal for Groupon, not the merchant. Her deal launched the weekend that the neighborhood library opened. She got more traffic when she least needed it…
Most customers didn’t spend much more than the deal value. Groupon told her that something like 98% spent more than the value of the Groupon. “You think maybe like $5 above the value, not like 10 cents.” It’s in Groupon’s interests to make the deal value as high as possible because they get a cut of that. They don’t get a cut of anything extra that someone spends at the business.
She estimates that she lost $10,000 in hard costs. – Jessie Burke, Posies Cafe. Her blog post.
Microeconomics of the consumer web – Mike Speiser, GigaOM, Jun 2009
The marginal cost of delivering web-based content is approaching zero, so while some publishers continue to charge for it, they are the exception and not the rule. This has led to the reliance on advertising as a revenue model by most consumer web publishers. But if the marginal cost of a page of content is zero, isn’t the marginal cost of a page of ads zero, too? This assumption, coupled with the financial crisis, has many people questioning the viability of advertising as a long-term revenue strategy. So is advertising dead?
One of these days someone will figure out how to measure the impact online advertising has on offline purchases, considered purchases, and a consumer’s willingness to pay. When that happens, some publishers will earn an order of magnitude more from advertising, while others will experience massive price deterioration. In the meantime, my money is on lead generation as the best way to build a consumer web content business.
How advertising works and why it won’t for Facebook – Matt Maroon, May 2008
Facebook can do a little better than just blanket advertising. They have complete demographic information and targeting. It would be trivial for them to enable customers to advertise to 18-34 year old males. And they might be able to get some clue as to your interests by what you put into the site. But they’ll never know what you want right now, and Google always does. Every Google query returns a website focused exactly on what you want to know right now.
How auctions set ad prices – Hal Varian, Chief Economist, Official Google blog, May 2008
All of the major search engines use auctions to price ads. The reason is simple: there are millions of keywords that need to be priced and it would be impossible to set all those prices by hand.
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