Excerpt: The Spark for Groupon

July 12, 2011

The following excerpt is from “Groupon Therapy” by Lauren Etter in the August 2011 issue of Vanity Fair (available on newsstands now), in which Groupon co-founder and CEO Andrew Mason shares how his work in developing an earlier social action website called the Point, the cost of which had been underwritten by investor Eric Lefkofsky, evolved into Groupon, which is considered by many to be the leading group discount buying site on the Web, after:

“I’d always thought with the Point that I’m going for the big win and changing the world,” Mason says. . . . But the socially conscious efforts didn’t attract enough subscribers, and they fizzled.   By October 2008, the Point was on the verge of being shut down.

“Eric [Lefkofsky] was pressuring me to think radically differently and figure out a way to monetize the site,” Mason recalls. 

Mason had noticed that the most popular campaigns on the Point involved group buying.  He decided to set up a sub-business dedicated to commerce rather than ideals.  At first, Mason say, he thought the new business would just be a way to pay the bills.  His friend and co-worker Aaron With came up with the name Groupon — a fusion of the words “group” and “coupon.”

Mason credits Lefkofsky for the shift in his focus:   “He just created a splinter for me.  It was that agitation that he created that ultimately led to the formation of Groupon.”


Being Bad With Technology

February 6, 2011

The recent skewering of Kenneth Cole’s CEO by the “twittersphere” for his bad attempt at humor by connecting this past week’s mass protests in Egypt to the Kenneth Cole brand provides one of those object lessons that I’m sure make marketing people cringe (although I’ve heard cynical PR folks observe that even this type of publicity is priceless in a good way) and that we all get with the benefit of 20/20 hindsight.  There have been other notable inappropriate uses of new media by businesses and their executives, but considering the relative age of such technologies, I’d suggest that some of the authors of these faux pas probably deserve to be cut some slack.  Whether such leniency will be in order say 10 years from now  — when the contours of propriety with this stuff will have been better worked out — is another story.

However, the Kenneth Cole incident brought to mind the case of Vitaly Borker and his DecorMyEyes.com website, which is a truly sordid episode of the misuse of online technology for marketing purposes (of a sort) that unfolded a couple of months ago.  The DecorMyEyes situation seems to have received far less attention, at least based on the instances where I’ve mentioned it to others and realized they had not heard of it, so I thought I’d provide a brief overview. 

In a truly terrific piece of investigative reporting by NY Times writer David Segal, who was working on a story about why Brooklyn-based DecorMyEyes had generated such a substantial number of consumer complaints, Borker revealed in an extensive and audacious interview with Segal that part of the business model for this web-based business was to antagonize his customers to the point that they would write negative, even scathing reviews.  Sounds weird, right?  Except that Borker had somehow stumbled upon the realization that any publicity, especially bad publicity such as persistent customer criticism, jacked up his rankings in Google searches because, according to him, Google’s algorithm did not factor out negative feedback.   Here’s an excerpt from Segal’s piece:

Today, when reading the dozens of comments about DecorMyEyes, it is hard to decide which one conveys the most outrage. It is easy, though, to choose the most outrageous. It was written by Mr. Russo/Bolds/Borker himself.

“Hello, My name is Stanley with DecorMyEyes.com,” the post began. “I just wanted to let you guys know that the more replies you people post, the more business and the more hits and sales I get. My goal is NEGATIVE advertisement.”

It’s all part of a sales strategy, he said. Online chatter about DecorMyEyes, even furious online chatter, pushed the site higher in Google search results, which led to greater sales. He closed with a sardonic expression of gratitude: “I never had the amount of traffic I have now since my 1st complaint. I am in heaven.”

Perverse, for sure.  Perhaps if he had stayed below the radar screen with his unethical gamesmanship, Borker would today still be harassing consumers and enjoying his laughter all the way to the bank.  But the arrogance that he flaunted in his NY Times interview caught the attention of local and federal law enforcement and resulted in a major comeuppance when he was arrested by federal postal authorities several days after the interview on charges of mail fraud, making threats to customers and fraudulent business conduct. 

The entire original article by Segal makes for fascinating reading, as well as the ensuing comments over the following weeks from many readers and Google about its search algorithm and related changes.  While several organizations came across as less than diligent in their customer safeguards, the online retailer Amazon fares well in the piece.  Lots of lessons here.  For consumers, do your research before you buy online.  More generally, if you base your business strategy on a faulty premise, such as the unethical use of a technology platform, expect that the dumb behavior will eventually catch up with you, and that arrogance can only sustain itself so long.


Social Media Marketing Legal Issues

February 1, 2011

The Winter 2011 issue of my firm’s law and business publication, Trust the Leaders, focuses on Social Media and the Law.  That issue includes an article by me on social media marketing concerns, “Social Media Marketing:  The 411 on Legal Risk and Liability,” in which contractual concerns, compliance obligations and publisher’s liability issues, among other matters, are discussed. 

Also included are articles by a few of my colleagues on other legal-related social media topics, including intellectual property and workplace issues.

The full issue is available here:  Trust the Leaders Winter 2011 or at http://www.sgrlaw.com/resources/trust_the_leaders/leaders_issues/ttl28/


Object Lessons in Business Failures

January 31, 2011

Catching up on some posts here, a piece from an early January issue of the NY Times (“How Six Companies Failed to Survive 2010,” by Eileen Zimmerman, NY Times, Jan. 5, 2011)  in which six business are profiled that failed in 2010 is notable for the to-the-point candor exhibited by the subject entrepreneurs.   Hearing explanations for why their businesses failed directly from the people that ran them is akin to the clarity that comes from viewing a picture in place of the proverbial thousand words.   The businesses range from a web-based personal finance portal to a gourmet baby food company and their problems range from inadequate financing to unexpectedly intense competition.   Very useful reading on pitfalls to avoid. 

A useful adjunct to the above piece is the related NY Times “You’re The Boss” blog post by Jay Goltz from the same date entitled “Top 10 Reasons Small Businesses Fail.”  Goltz’s list applies equally to larger businesses and includes the “math not working”, owners who can’t get out of their way, and out of control growth.  The reader comments are also good stuff.


Twitter’s Challenge of Capitalizing on 160 Million Users

October 19, 2010

As is proven over and over again in the arena of early stage companies, just because such a company has developed a nifty piece of technology does not mean that the world will actually beat a path to its doorstep — at least not with money in tow.  It takes lots of hard work, skillful execution on a good business plan, and a fair amount of trial and error (and some luck) to bring that reality to bear.  So, it’s interesting to see the recent attention being devoted to the diligent efforts of the microblogging phenom Twitter as it finally seeks to define a viable revenue model for itself, much of which hinges, not unsurprisingly, on various forms of advertising. 

There are many lessons here about which any growth stage company can take heart.  In particular, I found the following observations, from a piece in last week’s NY Times, to be especially candid and revealing about the challenges faced by Twitter in its quest for an as-yet elusive revenue strategy:

“But many advertisers and executives say there are questions to be answered and experiments to be done before Twitter becomes a must-buy, if it ever does.

“Agencies are uneducated, brands are uneducated and, to a certain extent, Twitter is uneducated,” said Ian Schafer, chief of Deep Focus, an interactive marketing agency.  “There are no best practices.  There are just hunches about what will work.””

(NY Times, 10/11/10, p. B1)


Quebec’s Distinguished Office in Atlanta

October 17, 2010

While I’ve long been aware of Quebec’s many cultural treasures and business opportunities, it’s only recently that I’ve become better acquainted with the sophisticated approach taken by the province of Quebec in cultivating economic development and other ties with the United States.  The province has long maintained six regional offices in the U.S.  — in Atlanta, Boston, Chicago, Los Angeles, New York and Washington, D.C. — each of which (other than the D.C. office) is responsible for coordinating relations with a large group of surrounding states. 

The leadership of the Quebec Office in Atlanta includes: Ginette Chenard, Delegate of the Quebec Government, who is also the Head of Mission; Andrée Tremblay, Govermental and Public Affairs Attaché; Louise Fortin, Head of Economic Affairs Services; and Liliane Laverdière, Business Development Manager for Investissiment Quebec, which combines the strengths of both a financial institution and an economic development agency.  

Over the past year, I’ve encountered the staff of this Office on several occasions.  In one of these meetings, I  attended a  masterful presentation on investing in Quebec, which the Quebec Office organized in conjunction with the always superb Canadian Consulate in Atlanta, that opened my eyes to aspects of the province about which I was unaware.    More recently, I visited with some of the Office’s representatives at a multi-national trade showcase held at a nearby convention center.  In each of these and other instances I’ve been impressed with how engaging and talented the staff is in presenting a positive impression for the province. 

If each of the other five Quebec offices in the U.S. do anywhere near as professional a job as does the Atlanta Office then many useful benefits should continue to accrue between Quebec and the U.S.   Mai beaucoup de bonnes choses continuent de se développer entre nous!

Link to Quebec Office in Atlanta:  http://www.gouv.qc.ca/portail/quebec/international/usa/accueil/atlanta/