Groupon filed with the SEC for an IPO, a move that suggests the company wants to quickly execute on the potential social-networking Wall Street Love Wave that LinkedIn showed us. There’s always a question of whether the bullish view on social will sustain itself, though. One might even argue that Groupon thinks it won’t, and thus is in a hurry to make its move.
Groupon is an interesting “social” company because it’s probably the least social of all the players who are tagged with that label. In many ways, in fact, it’s much closer in terms of its paradigm to search because it’s value is driven by the buyer getting to the execute phase. Social networking is good at building buzz but it’s far from clear that it is as influential in actually driving a buy.
This issue came out in a personal way when Google’s Schmidt reminisced about his tenure and offered the comment that he’d perhaps waited too long to try to grab Facebook and that Google didn’t “get social”. It’s always harder for a company to jump outside its core competence, in no small part because VCs consider it a loss of focus and the Street thinks it’s an admission the company’s core market won’t sustain its growth expectations. Schmidt might regret his move, but in the long term he might be right.
So here’s the thing. If somebody erects a massive office building and sells ad space on a blank face, people will for a time buy space and plaster on their billboards because it might work. The test for the endurance of the business model isn’t that initial success, it’s whether over time those who’ve tried the advertising mechanism find the return to be credible. That’s often hard to prove (you can buy reports to show anything you like these days), so it can take some time for a model to prove itself, or to fail. And Groupon, to circle back, is only marginally profitable even now. Hurrying to an IPO might be a smart move. Apart from everything else, the coupon model is way too easy for others to play with, including Google, Amazon, and even Apple.
In the mobile space, we’re heading for some dramatic changes, I believe. Apple’s upcoming iCloud announcement and Microsoft’s emerging tablet strategy are combining to create the beginning of not only a new appliance war, but a new network services war and a new paradigm for the whole mobile ecosystem. It seems pretty likely now that the LightSquared model of wholesale 4G is going to stand or fall not based on operators buying added capacity for areas they don’t serve directly, but by big players who decide to become MVNOs.
The MVNO model is at one level an accommodation to thinning margins. Appliance players see it as a way of taking their installed base and monetizing the network services they consume—getting a piece of that pie in the long run. But it’s also a possible way to create a service community for yourself. It’s not impossible to build a cloud service success on a pure edge or OTT model, but it would be easier if you had the ability to offer hosted stuff to your base from within their wireless service. Remember that wireless neutrality is far less restrictive than wireline (even assuming either one get past the court appeals now underway).
This model is probably why Microsoft sees Phone 7 and Windows 8 and tablet success to be so important. They need an appliance success or they can’t be an MVNO success, which means they’d face the same kind of problem with mobile that the whole Windows Live thing was supposed to fix for them online. Apple sees this opportunity, Google sees it, Microsoft sees it…it’s just a matter of who figures all the pieces out and gets there first. I’d bet on Apple.
