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In the most generous case, Groupon’s newest revenue stream could be worth an extra $2.5 billion in business.
That stream is Groupon VIP: a new annual membership service that gives the company’s power users opportunities for early bookings; access to past deals that have already expired or sold out; and no-questions-asked conversions of unused deals into credit for future Groupon purchases.
Unfortunately for shareholders, the $2.5 billion scenario just won’t happen — at least not for a long while. But if the $29.99 yearly subscription service does well in its initial rollout (Groupon told Business Insider that only “Groupon-addicts” in a “handful” of markets would be targeted), one wonders how many of the company’s 83.1 million registered users (as of March 31) would be willing to buy.
A conversation with a user who spent roughly $500 on daily deals in the past year suggests some of the VIP program’s features might offer more appeal than others. In particular, the opportunity to use money from expired deals on future deal purchases sounds like “a pretty good feature,” the Groupon user said. Access to expired or future deals offered less appeal in this particular case.
Not surprisingly, Groupon’s existing policy on expired deals is extremely explicit. According to its Terms of Sale, expired Groupons may be redeemed with the merchant for the original purchase price, but the promotional value cannot be recovered. For example, a $10-for-$20 Groupon can be redeemed for $10 at any point after the deal’s expiration. Groupon’s VIP program would allow users to use that $10 toward a later deal.
Groupon’s offer is different from LivingSocial Plus, the subscription model initiated by Groupon’s largest competitor at the end of last year. For $20 a month, LivingSocial Plus subscribers receive $25 in deal credits — essentially, a 20% discount designed to convince users to commit to spending $240 on the site each year. Groupon VIPs do not receive deal credit for signing up.
Two markets being targeted with initial Groupon VIP invites are Tampa, Fla., and Hampton Roads, Va., reports TIME.
The introduction of its new yearly subscription model for power users is hardly the only news coming out of Groupon headquarters this month. Late last week, the firm acquired Kima Labs, creator of Barcode Hero (a barcode scanning app) and TapBuy (a daily deal mobile app that also processes payments).
On the Monday following that deal’s announcement, Barcode Hero had been removed from the iPhone App Store, and its website has been replaced with an announcement about the acquisition. As for TapBuy, that operation will also be eventually shut down, but “on a longer schedule” than that of Barcode Here, TechCrunch reports.
TapBuy is similar to Groupon in that it offered daily deals to its users prior to its acquisition. But TapBuy differed from its new corporate parent by also processing payments, which it did by collecting credit card information from users.
It was Groupon’s second mobile-focused acquisition of the week; on Friday, it acquired Hyperpublic, which combines deals and events with geo-location technology. TechCrunch interpreted the combination of acquisitions thusly:
“Put together, they give a strong indication of how Groupon sees its mobile future shaping up longer term: yes, the company wants to push good deals to you when you’re on the move and near a point of purchase, but Groupon could be looking to play an even more central role in the bigger opportunity in mobile commerce, too.”
Alex Walsh is the Editor for PYMNTS.com
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