Groupon is an interesting platform for small business owners. It is an advertising platform for these businesses to offer their products or services at discounted prices. Groupon’s business is predicated on having a large email or viewer base – especially in local markets since many of the businesses that advertise on the platform have physical locations within a region. The platform will take a cut of the revenue for every “voucher” purchased on their platform. The main benefit to small business owners therefore seems to be increased volume (or essentially an increased number of customers) – an increase that these small business owners hope will result in the retention of these new customers who will pay for more full-priced repeat orders.
However, I would like to make the argument that Groupon as a platform actually has the opposite effect to small business owners and especially to the world of start-up entertainment. The comedian Ali Wong is a clear example of this.
Now, you may know Ali Wong from her Netflix specials. Her road to stardom was unique and different from other comedians. She broke out onto the scene in 2016 with her Netflix comedy special called “Baby Cobra” and has since skyrocketed into motion pictures, sold-out shows and multi-million dollar deals for her next digital content.
But prior to her breakout in 2016, she was a struggling comedian trying to make money from her stand-up shows. Prior to the Netflix special, she could barely fill her shows and found herself going on Groupon for her business to sell her show tickets. She described the process as “depressing” and “not, like, a cool thing if you’re on Groupon”.
And that can be seen in her business results. While listing on Groupon may have provided her greater coverage in both 1. giving her a wider audience base and 2. allowing her more people to test her material on (an important step within her R&D process as a comedian), it decreased her brand by basically announcing to the world that her show was not in high enough demand to sell out. She also likely was receiving lower quality customers – ones who normally would not pay for comedy or those who are just bargain hunters – and therefore, was not receiving the type of repeat customer in the world of entertainment who would want to become avid fans, follow her trajectory and enjoy her shows again and again.
While she may have been able to move her ticket inventory through posting this deal on Groupon, she likely received minimal profits, especially since Groupon keeps on average 50% of revenue from each coupon deal. Not to mention, she was now setting a new standard for the price of her product – of her comedy – to be lower than it previously was. This new standard will be hard to raise later without something to catapult her into celebrity status, therein increasing customers’ willingness to pay for her show. This new standard will make it even more difficult for her to make up that fixed cost of booking comedy stages in the future.
Even if she did gain some repeat customers from this Groupon deal, she still did not become a household name – did not gain that catapult to stardom or celebrity – from this Groupon deal. And therefore, I would make the argument that Groupon was not an effective advertising or marketing tool for her.
Netflix, on the other hand, completely changed Wong’s life and business trajectory. Because of Netflix’s decision to invest heavily in comedy – specifically through producing original comedy specials, which had typically only been made available for those who had already achieved fame – lesser known artists, like Ali Wong, were given the jumpstart that they needed to kick off their careers. Through making it easier to access comedy by unifying all its content on one platform and producing all this new content for the genre, Netflix didn’t just capture the value in comedy, but also created value by increasing the total number of viewers for the genre. In 2019 alone, half of Netflix’s subscribers have seen at least one comedy special and super consumers of the genre – defined as those who have watched at least 10 comedy specials – have grown 59% over the last year.
And that is why Netflix was able to create the marketing push that Ali Wong really needed to monetize her comedic talents. Netflix’s subscription model with its fixed fee offers its customers no incremental costs (besides one’s time) to access Wong’s content, while Groupon’s offerings have more barriers for customers to get over. Netflix’s great number of subscribers also provided the large reaching audience (both nationally and internationall) needed to create stardom, while Groupon focused just on local markets where her shows were being played and almost diluted down her brand image through these discounted tickets. Netflix not only created a better value proposition to customers, but also increased the number of customers it could offer this product.
Therefore, I make the argument that if you are talent, I would dedicate all your resources into landing a Netflix deal and avoid listing on Groupon. The upfront margin given up to Groupon could be thought of as a customer acquisition cost – a marketing investment. However, combined with the future revenues lost from the brand dilution, listing on Groupon will only result in lower overall business performance.
A better use of resources would be to dedicate these marketing dollars to the activities that will get you to land a Netflix special (such as frequent, usually free performances at these comedy cellars to hone the act and get noticed by a scouting agent). Investing in these activities to get you on to the streaming platform has a greater return on investment than Groupon. Because if you are lucky enough to get picked by Netflix for a special, you will be offered not only a fee to film the special — fees that can start at about $50,000 per one-hour long special — but also future earnings from sold-out stand-up shows and even movie deals as you grow your fan base and celebrity status. Netflix, not Groupon, as a platform was the marketing tool that Ali Wong used to successfully become the “current queen of comedy”.