Groupon, a leader in social shopping and group buying operations, has reached a value of $3 billion in less than three years; their daily deals are distributed in over 29 countries and they’ve reached over $500 million in sales in 2010 alone. Recently, however, Groupon has fallen victim to their greatest foe…their own success.
According to WatchMouse — a web monitoring firm that monitored 11 social shopping websites between November 22nd and the 22nd of December — the Groupon website was down for over 26 hours during the holiday season. Co-founder of WatchMouse, Mark Pors stated,
“Groupon is the fastest growing company in Internet history, and has been running a ‘Grouponicus‘ holiday campaign in the days leading up to Christmas… Unfortunately, they have experienced problems related to overloaded servers and time-outs that have likely cost them significant revenues… Social shopping is very hot trend right now, and the impact that a quick and reliable site can have on sites like Groupon and others is hard to ignore.”
According to a Retail Merchandiser special report on the hottest trends of 2010, “Holiday 2010 is set to be a breakout year for social shopping.” Customers are overloading their social networks searching for the right gifts for family and friends. This probably led to the GroupOn flood.
Even some of the smaller companies that use Groupon to boost their profits have fallen victim to Groupon’s surge in new business. Groupon is currently in works to help these smaller businesses by releasing a mobile phone application for retailers to keep track of deals purchased by their customers. A spokeswoman at Groupon responded to the WatchMouse report with the following statement,
“Groupon created an entirely new class of e-commerce which has led to unprecedented traffic and demand on site resources… It’s a problem many Internet category leaders have faced at some point. We’ve built a strong research and development team over the past few quarters, and they’ll continue to grow and make the global Groupon network stronger and more dependable as we get older.”
Earlier in December, Tumblr, a popular blogging service, experienced similar issues with their website as their demand grew. They redefined the term “we’ll be back shortly” by being down for half a day; which left many users understandably devastated and left Tumblr to raise millions of dollars to hire a larger workforce to work in their New York office. Twitter, which also experienced “growing pains” during their start due to their rapid success, has continued to prove that even being unreliable at times will not hinder a growing user base.
While Groupon’s road to success has their share of rough patches, they are currently in the works to raise close to a billion dollars to help fuel their development. After turning down a $6 billion offer from Google, Groupon is said to be raising the money on their own. This will prove their individual growth despite the setbacks. CEO Andrew Mason has declined to comment on the new round of funding aside from his Dec. 28th Tweet.