Everybody loves a bargain. And, for a short while, everyone loved Groupon, the daily deals company that promised large discounts on everything from bikini waxes to hot air balloon trips.
Groupon launched in November 2008. Within three years it had gained more than 60 million subscribers and achieved $760 million in annual revenues. It operated in 42 countries and had turned down a $6 billion acquisition bid from Google.
By the time Groupon successfully floated on the Nasdaq in late 2011 in what was then the largest IPO by an online company since Google, it was widely reported to be the fastest growing e-commerce firm ever, and easily the most mimicked.
"At one point, there were over 3,000 copycat sites in the US alone," says Rich Williams, the man recently put in charge of making Groupon great once again.
The new chief executive and Michigan native is speaking to The Irish Times on a quick visit to Dublin, a city he has visited plenty of times over the years since joining Groupon in June 2011, shortly before its flotation.
Groupon, which is headquartered in Chicago, employs close to 150 at its international engineering and marketing centre on Dublin’s Burlington Road. With plans to take on more staff in the coming months, Williams is here to rally the troops at what is a make or break moment for the firm.
Williams took over the lead role at Groupon last November. At the time, its stock had fallen by 50-70 per cent, it had recently cut 1,100 jobs worldwide, and was in the process of withdrawing from 17 of the 45 international markets in which it operated.
With many consumers now viewing the daily deals phenomenon as a passing fad and merchants having had mixed experiences using the platform, the days of Groupon seemed numbered.
Yet rather than seeing his new role as a poisoned chalice, Williams says he relished the opportunity to turn things around.
“I had a lot of people asking me what the hell I was doing, wondering if I was crazy,” he says. “But I’d been with the company for a few years, believed in it, and could see the progress that we were making in a light that wasn’t coloured by news headlines.”
Williams, who had previously worked in high-level marketing roles at Experian and Amazon, has had a steady rise to the top at Groupon. He joined as its head of marketing before becoming president of North American operations, chief operating officer and, as of last November, chief executive.
Williams believed he was the one to save Groupon. Investors were not sure. Shares plummeted more than 25 per cent in after-market trading on the day he was appointed to replace company co-founder Eric Lefkofsky. They hit an all-time low of $2.54 a few days later.
The new boss’s claim that he didn’t need to create a 100-day plan did little to reassure the market.
“I took a little bit of heat when I first came into the job because I said I didn’t need 100 days to get started,” Williams says. “I wasn’t being cocky or thinking that I was smarter than anyone else; it was more a case that I’d been here for years and had a strong view on what we needed to do. “This meant that it didn’t take me 100 days to build a plan, but instead we hit the ground running with executing a strategy I’d already worked out.”
His starting point was to address a number of misconceptions about Groupon. The most important one, to his mind, was that the company was misunderstood.
“We haven’t done enough to tell our story over the past few years. And we haven’t always been humble about our hits and misses,” he wrote in a blog post two weeks after becoming chief executive.
As a marketing guy, Williams admits he has to take some responsibility for the fact that Groupon hadn’t done a great job in outlining how much it had moved in the past few years. He also believes the company grew “too fast, too soon”, meaning it wasn’t always as focused as it could be.
Moved beyond email
“We hadn’t been successful in changing customer perception fast enough,” he says.
“For example, there are still plenty of people who think of us as that daily deal email company, and yet we’ve moved way beyond that over the last few years.
“These days we’re a mobile company. Most of our transactions come through people browsing and searching on mobile devices rather than through emails. We failed to do enough to help people understand that transition.
“A lot of the negativity about the company was rooted in a whole ‘daily deals are dead’ thing. And we were like, yeah, we know that, that’s why we started building a marketplace. We knew it was a challenged business, and we worked hard to change our model because of that.”
Email used to represent more than 90 per cent of Groupon’s business. Now it less than 30 per cent.
A perception that Groupon was bad for business also damaged the brand, Williams says.
Tales of merchants getting their sums wrong and advertising discounts they struggled to fulfil abounded. In the early days, he acknowledges, neither Groupon nor its many rivals had any real idea of what they were doing. The key focus was about getting as many good deals out to customers as possible.
“If a steakhouse came up to us wanting to put out a 90 per cent off deal, then we were like, hey, great, that will sell,” he says. “There was a bit of a scramble at one point and a lot of people put out offers that either didn’t make sense or constructs that weren’t healthy” for their business.
“Over time, what’s really separated us from our competitors is that we have made big investments in data and controls around how deals are created, so that, with a couple of questions, we can be sure what a merchant is able to handle.”
Profitable deals
“Over 80 per cent of deals we cut with merchants are profitable on the deal itself rather than being loss leaders, Williams says. “That’s not where the business was four or five years ago, and it is why we went from having 1,000 deals on our platform at the time we went public to currently having 650,000. “If our platform wasn’t working for merchants, they wouldn’t be on it,” Williams adds.
Groupon has also taken steps to ensure better quality deals, Williams says. Agreeing that there was something of a race to the bottom in terms of the quality of some offers, he guffaws out loud on being told of one rival that offered a two for the price of one deal on STD testing.
When he took over the top job, Groupon’s market cap had fallen to just $2.5 billion.
Williams says he had four key aims on taking the chief executive’s seat: to invest in growth; to streamline the business by focusing on key markets such as Britain, France, Germany, Italy and Australia; to create a better customer experience; and to get away from what he refers to as “empty calorie growth”.
“Not all growth is created equal, and the easiest example I have of this is not wanting to sell negative-margin iPads just to boost revenue numbers or to hit a short-term target,” he says.
A key part of Williams’s future plans is to focus on the local space in each market, focusing primarily on food and drink, health and beauty and lastly, activities.
“Value is always more than just about saving money,” he says. “Being able to book a restaurant table easily, find a service provider that can meet your needs and so on are also important.
“For some people, convenience is more important than spending less, so we’re going to be expanding our offerings to be more value-orientated in ways that aren’t just about price.”
Moreover, he says, value is not a fad and Groupon’s subscribers are also perhaps not what you’d expect.
“As economies started to turn around more in recent years, we wondered whether we’d still be relevant.
“But I look at our customers, and they tend to have much higher income and education than the norm. They are not penny-pinchers.”
While Groupon may have lost some customers in recent years, Williams is keen to point out that it currently has 170 million unique users a month, of which 15 million are active. Moreover, last month it announced it had sold its billionth Groupon offer.
In an attempt to woo subscribers back to the brand, Groupon will increase spending on advertising in the coming months . It won’t happen quickly. Neither will winning round investors.
Williams agrees that, as with Twitter, Groupon hasn’t always met with the market’s approval.
“Over the course of four years as a public company we weren’t meeting expectations all the time,” he says, “and we had moments when we set expectations that we simply couldn’t meet. The challenge for us and for Twitter is that, when you say you’re going to do something, you have to deliver or you have to be really clear why you haven’t.
“We haven’t always done that and neither have they [Twitter], and it’s a tough space to build your way out of.”
Beat estimates
If investors were initially unsure about Williams, it seems they are warming to him. Groupon’s fourth-quarter earnings beat analysts’ estimates and the group’s shares have jumped 89 per cent since February 2nd, reaching a seven-month high of $4.78 last week.
Williams is keen to stress the role of Irish operation in the company’s success. He also boasts that just about everyone in Ireland has bought a Groupon at one stage or another.
Unsurprisingly, he also claims to make a large number of purchases on the platform himself, with the latest being an emoji pillow for his young daughter.
A large number of Groupon’s online coupon rivals have ceased operations in recent years, including Amazon Local and, here in Ireland, INM’s GrabOne, which closed last November. However, Williams believes his own company is definitely on the rebound.
“We’ve made real progress on all of the core pieces of my initial strategy. We have more merchants on our platform than ever before, we’re meeting the challenge of encouraging people to use the product differently, and I think we can be one of the greatest companies online,” he said.
If Rich Williams is right, it will be those shareholders who dared take a punt on the company when it was in the doldrums who end up scoring Groupon’s biggest bargain.
CV
Name: Rich Williams
Age: 41 Position: chief executive, Groupon
Family: Married with one daughter
Lives: From Michigan, now lives in Winnetka, Illinois
Something you might expect: As with many tech chief executives, Williams is a keen athlete who is never far away from his bicycle. He also has a penchant for endurance events and last year took part in the Leadville Trail 100, an ultramarathon that takes place in the Rocky Mountains.
Something you might not expect: Rich has been a winegrower for 12 years. He and his wife, Melinda Doty, own Stage Left Cellars, a highly regarded urban winery based in Oakland, California.
