Information and Direct Benefit Effects on Groupon
An article on CNN Money describes the earning struggles for the familiar consumer-deal company: Groupon. The article can be found on the CNN Money Website at the following address: http://money.cnn.com/2012/11/09/technology/groupon-stock/index.html. Although the article focuses on Groupon’s poor business model and the difficulty of attempting to monetize its business, the idea of Groupon is based on Network principles.
The Groupon business model is built around offering a “Groupon” each day in each of the markets it serves. Examples of these markets that Groupon serves are cities such as New York City, Boston, and over one-hundred and fifty others in North America. In order for the offer/“Groupon” to be valid a certain number of people need to sign up for it. If the required amount of people sign up for the offer then the offer becomes available to all of the people. Otherwise, if the minimum is not met, no users are able to get the deal that day.
The reasons that users might sign up for deals can be thought of as Direct Benefit and/or Information Effects. For example, the direct benefit of being part of the group in this example is that you will be eligible to save money at a local attraction. The payoff of being part of the group is the money that you saved by signing up for the deal that was made available because a large group of people also signed up for it. There could also be an Information Effect that encourages users to sign up for deals that they see are popular. For example when a user sees that many people have signed up for a certain deal he/she may be inclined to think that those other users know something or have access to information that he/she doesn’t. Maybe the deal is for a restaurant, and if many people sign up for the deal others will be encouraged to sign up too because they may think that the users who have signed up know that there will be good food.
-NetworksBlogger2040
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