Is the Groupon Model Sustainable?
-- Group buying site Groupon has its share of believers and nonbelievers. Live Nation believes in the company enough to start a partnership called GrouponLive, a service that offers bargains on tickets to concerts and other events. But there are plenty of people who look at Groupon as the embodiment of a second tech bubble.
And how sustainable is Groupon's business model? It's pretty iffy, Wharton marketing professor David Reibstein says in a Q&A with Knowledge@Wharton. The market has a lot more competition than it used to have, and it's unlikely to support current growth rates. But it's the business model he's most worried about.
One problem is that Groupon and similar services attracts what he calls "deal-prone customers," in an effort to get rid of inventory or attract new business. "These customers tend not to be the most loyal of customers," he says. "And because you have attracted them with a low price, you are more likely to lose them because somebody else offers a lower price."
In addition, Reibstein doesn't think the business model will perform as well when the economy recovers. "The reason some retailers might be willing to provide supply to Groupon is because they have excess inventory. That is particularly the case for services… As the economy picks up and there is less excess inventory, the availability of supply will go down. The willingness of the merchant to offer deep discounts will go down. The business proposition to the customer will be less attractive if [the item or service being offered] doesn't have the same deep discount."
OK, but maybe you're thinking, "What about coupons?" They have existed for decades, have grown in popularity during recessions and haven't been ditched by either local businesses or national brands. Reibstein doesn't get into fundamental differences between coupons and Groupon, unfortunately.
In the end, Groupon will succeed as long as businesses keep lining up to offer discounts. As Reibstein points out, Groupon can be great when a business attracts incremental business. But when existing customers use Groupon to save money, it can result in lost revenue. So what will become important is Groupon's ability to help businesses find incremental customers without sacrificing existing customers.
And there has been no shortage of businesses running Groupon specials. According to a post at Business Insider, 68 Groupons each collected more than $100,000 in the month-long period prior to the March 20 post. On average, a Groupon deal offered a 56% discount and generated 350 sales worth $8,750 in revenue. The most successful NHL Groupon was by the Nashville Predators, and the best NBA Groupon was by the Toronto Raptors.
Roku Partners With YuMe
-- Roku, maker of streaming video set-top boxes, has partnered with video advertising company YuMe to provide video advertising to content owners. YuMe has a product for publishers called ACE for Publishers. On its website, YuMe describes ACE for Publishers as "a complete set of cloud operations tools that helps you expand your advertising inventory and control how it generates revenue."
This news item is notable because Roku has a lot of music video in its video products (it also has plenty of streaming audio from Pandora, MOG, Rdio, Soma and others). Classical TV offers a wide variety of concerts and music-related features. Baeblemusic has videos and live shows. And Y'all Wire has country, bluegrass and Christian music videos.
Want to Start A Cloud-Based Music Service? $100 million, Please
-- So you're thinking about starting your own cloud-based music service? And you're a technology company with a market capitalization of $168 billion and nearly $7.4 billion of cash and cash equivalents in the bank on March 31? That'll be $100 million just to get started, please.
An article at BusinessWeek.com claims Google was willing to pay up to $100 million to the four major record labels to license their music. But those talks broke down "over the music industry's concern that search results in Google and YouTube often point to pirated music."
By the way, it's just a coincidence that the labels settled its copyright infringement lawsuit with LimeWire founder Marc Gorton for $105 million. But it is a little eerie that those two numbers are so close to one another.
Good Reading: Q&A With Ludwig About Mastering, Remixing
-- Chris Castle's Q&A with Bob Ludwig of Gateway Mastering is great reading. Ludwig talks about some important things in mastering, remixing for playback on today's headphones and sound quality of different digital file formats. Here's an excerpt from a section on the loudness of today's music:
"Two areas where producers get upset about not having enough level is the iTunes Shuffle, or even comparing songs on the iTunes software itself, and that moment at the radio station where the PD is going through the weeks new releases and deciding which 2 or 3 songs will be added to his playlist. Here, sometimes having a little extra level can make a lesser song seem a little more impressive, at least at first listen."
(Music Technology Policy)