Just two weeks ago, then-Groupon CEO Andrew Mason did an interview with analyst Greg Sterling in which he showed no sign of concern about his job.
"My intuition has always been starting with the customers and building something that optimizes not for 2-3 months, but 2-3 years or even 20-30 years," he told Sterling during the interview, which was conducted on February 19. "And being convicted about those principles and being unwilling to stray from them is the difference between success and failure."
It may well have been the last time Mason did an interview with a member of the media. (Fast Company writer Elizabeth Spiers met with Mason in Silicon Valley in January; her interview, while not the last interview Mason conducted, is a must-read.)
Sterling's interview will be published on Monday by Yext, a local-information software company, on Monday in its Yext Quarterly, a publication it's creating for its business customers to educate them about trends in the market. With Yext's permission, we're publishing it here.
Cracking the Local Code
An Interview with Groupon Cofounder Andrew Mason
The story of Groupon is well documented. Born out of an earlier social-action startup called The Point, Andrew Mason launched Groupon in Chicago in 2008. The company quickly attracted investment and became the fastest-growing startup in internet history, expanding in the US and internationally through organic growth and acquisitions. Mason led the company to a highly anticipated IPO in November 2011.
More impressively, Groupon accomplished all this in the very challenging local and small business market, effectively bringing e-commerce at scale to local businesses for the first time. Now, in its post-IPO period, Groupon is diversifying beyond deals and seeking to become “the Local Commerce Operating System” for small business. In addition to deals the company now provides a point of sale system, electronic and mobile payments, scheduling and inventory management to local businesses.
In the following interview with Yext, Mason offers his reflections on the digital challenges facing small businesses, what it takes to succeed as an entrepreneur in local and what the market will look like five years from now.
Yext: What is the greatest challenge local merchants face in today’s evolving digital landscape?
Andrew Mason: We’ve found that local businesses aren’t early tech adopters. They are people who want problems solved for them. Evaluating all these different tools that are available to them, especially as we transition to mobile and tablets, is a real challenge.
Yext: How do they evaluate these competing sales propositions, channels, devices coming at them?
AM: They’re busy and they’re happy to rely on tried and true methods for marketing and tools to run their business. In order to understand the virtues of Groupon, we’ve had to hold merchants’ hands through the process of getting signed up, and have built a massive sales force to do so.
Yext: How have SMBs taken to adopting new marketing and advertising tools?
AM: Groupon is a form of advertising for SMBs. They measure the success too often by the size of the last tip that came through the door using Groupon, rather than a holistic analytical approach. We’ve found we have to coach them through how to evaluate the profitability of a Groupon campaign.
They know they need tools that help them improve their marketing and grow their business, but they will gravitate to the ones that will help them do it in a predictable way.
Yext: What has changed in local since Groupon was founded?
AM: I think for sure, mobile, that’s no surprise. Our business just in the last year has gone from 22% mobile, which was already doubling from the year prior, to 39-40% mobile this year.
In the same way that broadband facilitated the move of video from offline to online, mobile is doing so for local commerce. And it’s also enabling local ecommerce similar to how Amazon did for the move of product from offline to online.
Yext: What role will “Big Data” play in local?
AM: In our case, we can use just a few data points to help us find patterns and understand what consumers are looking for. We can also use it to help drive the right kinds of customers to a local business when they most need them. We’re just beginning to scratch the surface on how to use the data to build a local ecommerce ecosystem. The possibilities are endless.
Yext: What are the success factors for startups and digital media companies in the local market today?
AM: I was very deliberate when starting Groupon to make sure I had a model that did not have a chicken and egg problem – it had to work effectively at a small scale. Instead we actually had the opposite issue, it worked very well at small scale and, as we grew, we ran into issues bringing businesses too many customers. And we’ve had to innovate out of that problem.
They should also find a win-win-win model, where the business wins when consumers and merchants win. It’s unpleasant to have a business where you’re constantly forced to make tradeoffs between the best interest of the business and the best interest of the customers.
All of our success happens when we ruthlessly adhere to our values, which are to start with the customer and work backwards.
Yext: Five years from now, what problems in local will have been solved?
AM: The way people buy locally is going to be fundamentally different. There hasn’t been real tech innovation in local since the invention of the credit card, and mobile has catalyzed the disruption wave. Once we get the infrastructure to plug local businesses into the web, the innovation will exponentially increase.
Yext: What’s one thing you wish you would have known before you started Groupon?
AM: We didn’t just create a business; we created a category. Four and a half years later we are doing $5 billion in sales in 48 countries. The thing has grown massively and it continues to evolve at a similar rate. But you don’t have to be that smart to do well in business, you just have to have the courage to follow your intuition.
My intuition has always been starting with the customers and building something that optimizes not for 2-3 months, but 2-3 years or even 20-30 years.
And being convicted about those principles and being unwilling to stray from them is the difference between success and failure.
SEE ALSO: The Glory Days: How Andrew Mason And Groupon Rose To Incredible Heights
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