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Carefree About Coupon Rivals

If Groupon chief executive officer Andrew Mason is at all intimidated by the recent entry of tech titans Facebook and Google into the daily deal space, he certainly isn’t sharing it.  

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Groupon, Andrew Mason

If Groupon CEO Andrew Mason is at all intimidated by the recent entry of tech titans Facebook and Google into the daily deal space, he certainly isn’t sharing it.

Mason, who brought some unusual levity to an initial public offering, filed to take his Chicago-based online coupon company public last week and is in Asia this week. And when the 31-year-old CEO spoke to reporters during a briefing in Seoul today, he welcomed the arrival of Silicon Valley-based competitors to a deal space where Groupon is currently No. 1.

In late April, Facebook launched a pilot program in five cities called Facebook Deals, which will focus on getting friends to share the scoop on discounts for fun outings, while Google Offers had its coming-out party in Portland, Oregon, on June 1, with plans to take local deal offerings to New York and the San Francisco Bay area next.

“To some extent, they’re competitors,” Mason said at the briefing, according to a report in Bloomberg Businessweek. “That said, we welcome competition. We think it’s good for consumers, it’s good for merchants. We hope to see them bring innovation to the market. We welcome them to this space.”

Both companies are just dipping their toes into a market in which Groupon is already fully immersed, with 83 million subscribers in 43 countries worldwide. But given the size of Facebook and Google’s consumer platforms, their now-limited pilot programs could lift off pretty quickly.

The daily deals market, which Groupon basically pioneered, is expected to surge from $873 million in revenues in 2010 to some $3.9 billion in sales by 2015, according to researcher BIA/Kelsey based in Chantilly, Virginia. But Groupon is nonetheless, losing money as it expands its model into new markets. The company lost nearly $114 million in the first quarter of 2011, according to its IPO filing.

And a recent study published by daily deal aggregator site Yipit showed that Groupon’s growth in at least one of its oldest markets, the city of Boston, has deteriorated over time as interest flags among consumers and competition in daily deals grows. It is perhaps due to this weakness that Groupon has chosen to partner with two Boston-area marketing firms, Cambridge-based Incentive Targeting and Boston-based HaloEffect, to broker a deal with Springfield, Massachusetts-based Big Y Foods to offer the first-ever grocery store deal. This offer works in a different way: Customers redeem the discount by using preloaded loyalty cards.

But coming up with new deals isn't the only way that Groupon can expand. Another method is to grow internationally, hence the swing through Seoul, although Mason said that nothing has been finalized yet. He declined to comment on market speculations that it is seeking to acquire a local social-commerce company, according to a report in the Korea Herald, which referenced Groupon having expressed interest in acquiring Coupang, the No. 3 player in South Korea, after its attempt to buy the sector leader Ticket Monster Inc. fell through.

If testing in the United States goes well, the firm does plan to expand its Groupon Now service globally, Mason told reporters. It was released in May as a pilot program in Chicago, and lets smartphone users search for deals at nearby locations.

The Yipit study suggested that Groupon Now is the “silver lining” for the company. “With its massive sales force and many merchant relationships, Groupon is possibly the only company capable of having enough deal inventory to make a product like Groupon Now possible,” the research said.

With Facebook, Google, and most recently Amazon now in the daily deal space, Groupon could use that silver lining, no matter how unfazed its CEO is at the competition.


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Teresa Novellino writes for Portfolio.com

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