If you have been listening to the latest news about GroupOn then you know it is not good. The stocks have been falling like rocks all this year and it looks like the big backers are backing out fast. Companies, restaurants, and small businesses think GroupOn is no longer worth the hassle, and a hassle it is. Small businesses have been the hardest hit, with massive influxes of customers receiving poor service and GroupOn taking any profits they make on the deeply discounted deals. Now, GroupOn looks to be on its way out, and some say Twitter and Facebook should be following in its footsteps.
Ever since Facebook opened for trading, it seems to have gone downhill. Fair weather stockholders are a dime a dozen and the huge social media empire is sluggishly trying to make a profit without alienating its customers. However they have one big obstacle, Facebook customers do not like advertisements. So, how is the company supposed to make any money without ads? Well, they have tried to sell information about their customers in some parts of the world, but that has not worked out very well. Another disadvantage Facebook, and in the same way Twitter, has is that the customer attraction is all dopamine based. The reward hormone that gives you a buzz for noticing new and interesting things is the reason social media platforms like Twitter and Facebook exist. However, dopamine has a downside. You need higher and higher doses to keep feeling the buzz. Just like a junkie looking for his next fix, social media addicts are looking for a stronger buzz from new social media platforms like the very visual Pinterest.
So what does that mean for Twitter and Facebook? That means they better grow or get off the pot, to mix metaphors. If innovations are not made soon, the publicly traded Facebook may go the way of its predecessor MySpace, into oblivion. Twitter, though not publicly traded, looks to be headed down the same route.
Misuse and over capitalization of resources are to blame for much of the downfall, but there are other factors to consider as well. These three companies have lost sight of what they started and became known for, their ability to connect people. Instead, they have become more focused on profits and the bottom line.
Customers know that businesses like GroupOn, and even social media sites like Twitter and Facebook, cannot live in a bubble. They have to make a profit somehow. But other sites that have stayed the course and are still around like Restaurant.com, know what it takes for customers to be satisfied in the long run. What separates Restaurant.comfrom GroupOn? Conditions. Unlike the wide open and therefore gluttonous GroupOn, Restaurant.comallows its coupons to have set days they can be used on and days they cannot be used. While in the short term it may inconvenience a customer to go to a restaurant on a Tuesday instead of a Friday, in the long run they will get better service, better food, and be more likely to come back. That means the restraint will have repeat customers, stay in business, and be able to serve people better. It is a great cycle for everyone involved, which explains why Restraunts.com has been around for over ten years and GroupOn is going quickly down the drain.
No matter what the company is, they need to learn that making money in the short term is not the issue. Almost anyone can do that. Building a company and a strategy that will work in the long term is the trick. If you can not only get customers in the door but keep them coming back, then you really have a business. Until then, you will always be on the cusp of jumping the shark and losing everything. Now, when will social media get that point? Or will it take MySpace part two, Facebook to shock everyone into recognizing this pertinent fact?
About Brandon Leibowitz
