Andrew Mason: Daily Deals Sites
Fifty dollars of fancy tapas for only $25? Who wouldn't click on that?! Irresistible-deal sites mushroomed at mind-boggling speed this year, following the success of Chicago start-up Groupon. LivingSocial, BlackboardEats, jdeal (the deal site for Jews), and hundreds of others jumped on-board the trend, changing the way customers decided when—and where—to eat out.
Manning the nerve center of this hydra is 30-year-old accordion-playing iconoclast Andrew Mason, universally described as impatient and stubborn. Mason (who did not respond to interview requests) started Groupon with two friends after having problems canceling his cell phone contract. As he told Chicago magazine, he imagined building a platform that would harness the collective power of the Internet to make real-life changes, such as expressing displeasure with cell phone contracts. In 2007, he launched this platform, The Point, allowing people to pledge money for things they believed in. One was building a dome over the city of Chicago. "If you think of the value of making winter obsolete in Chicago, it's phenomenal," Mason told Chicago magazine.
Pressured to make real money by one of his biggest investors, Mason morphed The Point's business model into the collective online buying model we now know as Groupon, starting with a two-for-one pizza deal. The response was phenomenal.
In three years, the company has grown to 83 million subscribers worldwide and more than 7,000 employees: the fastest-growing company ever, says Forbes Magazine. And one of the most controversial. There were the tasteless ads during last year's Super Bowl, making a joke out of the Free Tibet movement (oh, and whales and deforestation, too). According to a profile in Vanity Fair, Mason's goal for the ads was to raise awareness for those issues. And then there have been the bigger, far more important issues of whether group buying actually hurts the businesses it's promising to help.
A study out of Rice University found that Groupon's customers are bottom feeders and low tippers. Though the idea is that Groupon is a marketing vehicle for restaurants, bringing in new customers who will become repeat visitors, it doesn't often work that way. Restaurant owners complain that Groupon users just go in search of the next restaurant with a coupon. The entire scheme ends up costing many restaurants more money than they make in repeat business: The restaurants slash their prices for the purposes of the coupons, and then Groupon takes 50 percent of that. For an industry with notoriously low margins (the restaurant industry, that is), the price of playing with Groupon is high.
Controversy has dogged Mason in Groupon's business practices, too. After refusing a $6 billion buyout from Google last year, the company postponed its much-anticipated IPO. It was forced to rejigger its balance sheets, and suffered embarrassment and further damage from an internal memo written by Mason that was leaked to the press when the company was supposed to be in its quiet period. In any case, love him or hate him, Mason has clearly created a monster. —L.A.NEXT: DAVID TRAN