Facebook and Groupon: Growing Pains or Have They Peaked?

June 14, 2011
By the ZippyCart Content Team

eCommerce solutions Facebook and Groupon can easily claim the title of being two of the heaviest hitters on the web. Between their IPOs, billion dollar valuations, and market domination, the two companies have grown in leaps and bounds in the past couple of years. However, recent user numbers and criticism suggest a change in attitude.

For Facebook and Groupon, is this the  dawning of a new age?

Facebook: Evolving into an ecommerce software platform for musicians and merchants, a looming IPO, and boasting nearly 700 million users —  has Facebook become too big for its own good?

Although the site continues to grow worldwide, it’s current 1.7% growth is attributed to developing markets like Brazil, Mexico, and Thailand who are just getting on the social media band wagon. Meanwhile, Facebook is seeing its biggest user decline in countries that have adopted it the quickest. Data taken from Inside Faceboook reveals almost 6 million Americans abandoned the site in May, falling from 155.2 million to 149.4 million by the end of the month. Canada dropped 1.52 million users while those in the United Kingdom, Norway, and Russia are each seeing losses of more than 100,000.

“By the time Facebook reaches around 50 percent of the total population in a given country (plus or minus, depending on internet access rates in that country), growth generally slows to a halt,” stated Inside Facbook’s Eric Eldon.

Considering Facebook’s activity in the last couple months, there are other possible factors contributing to the decline. In May, Facebook upped its security features that were designed to protect user accounts from malware and hacking. Just earlier this month a facial recognition system that automates photo tagging has stirred up controversy as to whether or not Facebook had gone too far.  And don’t forget the masses of users who randomly deactivate and then reactivate their accounts. The culmination may prove to be reason enough. Love it or hate it, Facebook is just too hard to quit.

Groupon: Filing for an IPO, increased vertical growth, and an over-saturated market — has Groupon become too much of a good thing?

The novelty of the Groupon is great, it introduces people to new types of businesses through a deep discount, and although this leads to great exposure for a company, it is also cultivating a “love ‘em and leave ‘em” type of consumer behavior. Customers love a discount, but will leave when the discount is gone in order to move to the next business, simply because they can afford to do it with a different deal offered each day.

Referring to an old adage, “Give a man a fish you have fed him for today. Teach a man to fish and you have fed him for a lifetime.” Groupon has clearly shown marketing success by driving large amounts of traffic to participating businesses, however in this economy, Groupon may be in a place where its signed merchants are just being fed fish. One major question surfacing on the web these days is just how much of the increased traffic is turned into repeat business?

What could be Groupon’s fatal flaw is that it doesn’t offer a brand shield to protect its signed merchants from being destroyed by a whirlwind discount that only brings a momentary sense of financial satisfaction.

As such, when the economy and major markets are in full upswing again, Groupon’s greatest allies — vendors, retailers and the like, could possibly turn against them and not want the daily deals sector to be a part of their brand or business identity. Perhaps, Groupon seems to be in rapid growth mode as a way to keep ‘getting while the getting is good.’

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