Is Groupon a 'Jesus Startup'?

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Self-described entrepreneur and blogger Dave Troy asks if Groupon is the next "Jesus Startup." Perhaps the first good question is, what exactly is a "Jesus Startup?" Apparently they are companies that "[grow] so swiftly" they "define the zeitgeist" and help "to inflate a bubble that defies any rational explanation." For every one of these startups that "create[s] real, thick value," there are other rapidly successful companies that either "dissipate as quickly as they emerged, or they settle into a kind of staid, middle-age." Boston Chicken, eBay, and Home Depot are examples of such companies, so-called Jesus startups whose influence is overestimated by the quickness of their success. According to Troy, in addition to a mythical origin and a "remarkable rise to greatness," there are certain other characteristics by which Jesus startups can be identified:

The implication is that they’ve done something to “ace” it so far. But the truth is that they are just regular guys that started out doing something else (some kind of social mission charity stuff – blech – don’t talk about that, it’s not compatible with the visionary myth). And after executing on their original idea and experimenting a bit, they found themselves in the middle of a new exploding business model. Kudos for that. But as is the case with most “Jesus Startups,” there’s been a notable lack of critical thinking about what happens next.

So is Groupon, the email-based deal promotion company, the next Jesus startup? It might be. Troy offers several areas of Groupon in which he sees the "notable lack of critical thinking" characteristic of the phenomenon:

  • Plateaus  Writes Troy: "Groupon has posted some crazy huge numbers as they push through massive expansion into new markets...As their geographic footprint stabilizes, top-line revenue will start to level out. When that happens, the business becomes much less interesting and has a lower upside."
  • Costumers are Already Losing Interest  Troy writes that, if you are a Groupon user, your experience with the company has looked something like this:
At first you reviewed the emails every day; you bought a few things; you are now buying almost nothing; now, you may not look at the emails at all; you still have unused Groupons. Time is money, and people have too much crap. Eventually, people are not going to take the time with this.
  • Not Enough In It For Businesses
A business can do a Groupon deal at most once every few months – otherwise the deal just doesn’t seem “special” enough. Groupon is a great novelty that can help some businesses become better established, but I really wonder if many businesses would participate more than once or twice, when compared to ongoing targeted marketing initiatives.
  • How Long Can Groupon Prevent Competition? Groupon and its biggest competitor, Living Social, are able to ward off their many other copycats because large investors have allowed them to expand globally which is difficult for most small businesses. But, Troy predicts:
The business that Groupon will eventually most resemble structurally is the Yellow Pages. With sales teams in every city, the major directory publishers were able to exert a near monopoly control over the interface between local businesses and consumers, and Groupon is going after the same market. The difference is in Groupon’s use of technology and use of social. Otherwise, the two businesses are nearly indistinguishable. The assumption is that Groupon’s scale will prevent competitors from gaining a foothold, but I don’t see any real reason a focused local competitor couldn’t develop a sustainable business.
  • It'll Never Survive in China
Groupon has undertaken a massive push to expand into China. That sounds great, and any US investor would likely salivate over such an aggressive, prescient-sounding move...But, to expect Groupon to be able to achieve anything meaningful in China is wishful thinking. Google got run out of the country on a rail. You expect the powers that be there to allow a US firm to “split” revenues with Chinese businesses to provide its budding bourgeoisie with deals on burgers, skydiving, and cupcakes? Um, yeah. OK. If there’s a business there, it will be Chinese.

This article is from the archive of our partner The Wire.