Groupon.com is a clever way to create demand for local businesses, and with their success plenty of me-too Groupons are sprouting up. This raises the obvious question that got asked on Quora.com the other day: Is Groupon a sustainable or defensible business? Here’s my take:
To create higher levels of defensibility they need more deals per city. With only a deal a day per city (~50 or so cities) the activation energy a competitor needs to catch up is fairly small (sales force and some search marketing spend). If they had more liquidity on the supply side (thousands of deals per day) it would be very hard to create this kind of supply with a sales force.
PS: I highly recommend Quora.com. If your following the right topics and people the conversations are thoughtful. Ping me if you want an invite.