- Reuters, Thursday, May 5, 2011 12:23 PM
Where does Groupon's value lie? Felix Salmon takes over 2,000 words in Reuters to lay out his answer, which comes down to a combination of "network effect" -- "the more people Groupon signs up, the
more targeted its deals can be" -- and "social" currency. Salmon, in other words, doesn't agree with Groupon doubters, like TPG's David Bonderman, who believe that the company's business model is
worthless because it has virtually no barriers to entry.
That doesn't give Groupon enough credit, says Salmon. For one, "Before Groupon came along, there was no effective way for
merchants to reach consumers in their area, while excluding everybody else." In contrast to other forms of marketing, merchants also love the guaranteed foot traffic that Groupon offers. "More
generally," Salman adds, "Groupons provide an important nudge to jolt people out of their day-to-day habits and try something new."
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