Each wave of Internet innovation has its own character, just as human generations do. Amazon, eBay, Yahoo—they were the Internet’s Greatest Generation, creating a new form of democratic commerce. And Google, when it gave us access to all of human knowledge, echoed the idealism of the baby boom counterculture. The way Web 2.0 blended real-world social connections with the social domain was a product of the millennial generation’s connected nature and take-it-for-granted use of technology.
One of the latest Internet movements is based on offering deals with local merchants. But it feels like a step backward to me—less a revolution and more a web version of everyone’s coupon-clipping grandparents.
The leader of this trend is three-year-old Chicago-based Groupon, headed by Andrew Mason, 31, who founded the company as an offshoot of a failed social-networking startup that generated group-based charitable donations. Groupon, which turned down a $6 billion buyout offer from Google late last year, is undergoing an eagerly awaited initial public offering.
Groupon’s model of collaborating with local merchants to offer discounts as deep as the Mariana Trench brought it $760 million in revenue last year—though, as countless critics have pointed out, no profit. Still, copycat companies have sprung up, and existing Internet giants, eager to extend into local markets, are developing their own systems. After failing with its Groupon bid, Google started building Google Offers, which the company is currently testing. And Facebook is getting into the game with a feature called Deals.
But the group-discount model lacks the revolutionary quality of previous online movements. Groupon and the like do not take full advantage of the powerful digital economics, in which a self-service model allows a company to scale up with few employees. Setting up discounts is labor intensive. You need salespeople on the phone explaining to business owners how the model works and convincing them that selling their wares for almost nothing will generate new customers. (Groupon typically takes half of the discounted price.) Then you need copywriters to gild the mundane offerings—manicures, lunches, yoga lessons—with enough knowing irony to fend off fears that the end user is engaging in cheapskate-itude. (Groupon reportedly employs aspiring comedians for this.)
Where earlier Internet firms disrupted encyclopedia companies, this one is simply breeding a modern version of encyclopedia salespeople. Mason somewhat jokingly acknowledged this when, in the S-1 prospectus for the upcoming IPO, he explained Groupon’s rise from the ashes of his former company as “selling out on our original mission of saving the world to start hawking coupons.”
In this economy, I’m hardly going to turn my nose up at something that can save consumers a few bucks. And there’s nothing inherently wrong with a company that focuses on discounts, especially if the company is helping local shopkeepers and service providers expand their business. Rather, my unease comes from a sense that this phenomenon represents a ratcheting down of the idealism that made the Internet special—efforts to change the world through unprecedented choice, lightning-quick knowledge, or sudden reconnections with long-lost friends.