Groupon launches in Toronto
Monday marked the official launch of group buying site Groupon in Toronto (Group + Coupon = Groupon). It turned out to be a very good day for Groupon as it also announced a new round of funding worth $135 million, giving it a total valuation of more than $1 billion. This places Groupon in a heady company of other social networks like Facebook, Twitter and Zynga with a similar valuations. Groupon was launched as part of The Point, a Chicago-based online community launched three years ago.
Groupon uses the idea of collective buying, bringing its users together to get discount deals from local businesses in 26 US cities so far and now Toronto. It offers one deal a day through a daily email alert. The deals only become activated if a minimum number of users commit to buy. This encourages users to circulate the deal to family and friends through social connections on networks like Twitter and Facebook. This guarantees new customers for the local business and great deals for the subscribers. Groupon currently has nearly four million subscribers.
Toronto’s very first Groupon deal was $40 worth of Craft Beers and Organic Fare at restaurant Local 4. The deal became activated just after 8am when the minimum number of 25 deals had been purchased. By 7pm on Monday night 444 Groupon subscribers had taken advantage of the offer, making Day 1 in Toronto a resounding success. There were lots of questions asked about the service and the daily deal in the Groupon forum today and its looks like most were addressed in a timely fashion by Groupon support and a spokesperson for the restaurant.
One of the most important aspects of social buying sites is the fact that the deals are local, and local is where the money is. This point is emphasized by Amish Jani, Managing Director at FirstMark Capital, in his BusinessInsider article Group Buying is more than just a fad.
I think the dynamics of group buying are very different than people think. In fact, I don’t like to call it group buying. I also think it has very little to do with retail merchandising. Instead, I put it in the category of perfected local performance advertising.
People have talked for many years that the local market is the holy grail for the next stage of online ad spend. The problem is how to convince the corner pizza shop or spa to value a “click” and spend money on this thing called “Google”. These merchants are way too busy in their day to day and have none of the time we have to study TechCrunch or Read/Write/Web to follow all the twisted ways we have come up with to advertise online.
Groupon is one of several social buying sites offer local deals including Yipit, Buy With Me, Living Social and local companies TeamSave.ca and TeamBuy.ca.
You can subscribe to Groupon’s daily email alert here and download the Groupon iPhone app here.