Groupon CEO Rich Williams: ‘We win if local businesses win’

4 Mar 2016

Groupon's CEO Rich Williams says the key to the future of the daily deals giant is helping businesses win through mobile, location and context

The CEO of $3.2bn-a-year daily deals site Groupon, Rich Williams, says the company is, at its heart, a data-driven business focused on empowering local businesses all over the world to win new customers through a combination of mobile, location and context.

Walking into Groupon’s Dublin offices near the Grand Canal is a bit like a metaphor for how the business landscape has changed so much in several years. At first, you walk past the opaque, shiny exterior into a world of marble floors and giant oak doors in what was the former headquarters of Treasury Holdings. But after descending to the lower ground floor the contrast is jarring.

You leave behind the austere world of Celtic Tiger Ireland and enter a warm, bright collegial environment with all the trimmings you would expect of a digital giant that has made its home in Dublin: a barista, beanbags, bright open spaces, breakout rooms, old Telefón boxes and meeting rooms named after Dublin pubs.

In the ‘Hairy Lemon’, I encounter Groupon’s CEO Rich Williams, who admits he pretty much grew up career-wise on the internet. Prior to Groupon, where he has worked for five years, he spent four years with Amazon and several years prior to that with Experian.

In Dublin, the company employs 140 people involved in areas from software engineering to sales and marketing.

Growing pains of one of the fastest-growing companies in US business history

Groupon is one of the fastest-growing companies in US business history but, in recent years, its greatest enemy has been that rapid growth. As Williams explains it, he has been spending much of his time untangling a complicated mess, turning Groupon into a leaner, more cohesive organisation.

Groupon was founded by Andrew Mason and Eric Lefkofsky in Chicago in 2008 after Mason was frustrated with the experience of trying to cancel a mobile phone contract and felt there must be a way to leverage people’s collective bargaining power.

Very quickly, Groupon grew beyond Chicago to New York, Boston and Toronto and, within two years, it was available across 150 cities in North America and 100 cities in Europe and Asia.

‘Groupon was literally the fastest-growing company in history. We were in a land grab environment where every country had clones of Groupon being launched and it was literally hand-to-hand knife fighting on a daily basis’

At the end of March 2015, Groupon was serving more than 500 cities worldwide and had nearly 48.1m active customers chasing 425,000 active deals. Just last week, the one-billionth Groupon coupon was acquired for a pizza in St Louis.

“Groupon was literally the fastest-growing company in history. We were in a land grab environment where every country had clones of Groupon being launched and it was literally hand-to-hand knife fighting on a daily basis. We were becoming a very large company very fast. Mostly we were putting very small teams of smart people into countries for the first time and just wishing them luck.”

A perfect storm

As CEO, Williams has been fighting a war on two fronts: ensuring Groupon stays relevant for consumers and businesses alike through a marketplace strategy, and restructuring the company to be more effective and lean.

“We went from being active in one city in 2009 to two years later 22 countries. We were launching a completely new operation in every country we entered.”

This resulted in a complicated array of IT systems and businesses structured around 48 different tax systems.

“It’s a work in progress but we are much further along. Most of the heavy lifting has been done. For example, a few years ago we had eight different technology platforms, now we are down to two. We used to have 20 different instances of customer service, now it’s one global team. From the beginning of the year, we have changed our focus from running in 48 countries down to 28; we exited countries that we didn’t feel were aligned with the business.

“Being a young company was an advantage because while we had to make tough calls we were able to exit countries in a faster way than it would take traditional companies years to exit.”

I put it to Williams that Groupon was born out of a perfect storm: the rise of the smartphone and a declining global economy, which encouraged people to seek out better value for lifestyle experiences like food, beauty and recreation. As fortunes and economies improve, does this threaten Groupon’s original premise?

“In the US, particularly, people used to feel better when they spent more money on stuff. That didn’t last long.

“A guy I used to work for at Amazon said ‘you invest in the things that don’t change’. One of the things that doesn’t change with consumers is their desire to have really great value and, in general, saving money is a big piece of that.

“In fact, our customer base skews much higher incomes, even higher than Amazon’s core customer. Our core customer demographics control a lot of household spending, are very highly educated and care a lot about saving money and value overall.”

He explains that, while Groupon began as a daily deals service that pushed emails to users, it is now also a destination, a marketplace, where users seek value but also expect value to find them using a blend of local context and mobile technology.

“People love finding new places to eat and drink, new health and beauty products and finding things to do, like getting the kids out of the house on a Saturday or going skydiving or parachuting. It’s an amazing category here in Ireland, and lots of people are interested in finding deals around golf.”

As such, he says it is no longer just about finding ways of saving money on things, it’s really about people finding the right things to spend money on and get value.

“For some customers, savings are great, but value is finding something that I never would have thought to try. Another customer value will mean getting a table at 7.30pm at that restaurant they really want to go to.

“At Groupon, we continue our move to the marketplace model – you are going to see more ways for value to come up with our product. We have millions of units being booked through reservations systems yet more and more people are looking to us for discovery. This involves proximity-based push notifications that will surprise and delight you; if it is at lunchtime and there are 10 Groupon restaurants around, we should let you know.”

Context and location at heart of Groupon’s future

But now, Williams points out, context matters in a whole range of ways. For example, Groupon recently forged a deal with concierge service OnStar, which features in a lot of GM vehicles in North America, to connect consumers with deals while they travel.

According to Williams, Groupon’s Irish operation is at the centre of the company’s software development efforts, particularly in areas like mobile.

‘The engineering teams here in Ireland are building, and in some cases own, the global platform’

“We opened up the first Dublin office almost four years ago down in a tiny room with four people, then it became eight people. At first, it was really an experiment – we created a small team with a specific thing they were trying to build and gave them room and space to do it. Now it has grown to 140 people and growing and, more importantly, this team is a part of the global business, no longer building the one thing that was interesting.

“The engineering teams here in Ireland are building, and in some cases own, the global platform. For parts of our global display products, even the North American operations in some of these channels are run out of here. It is a real core piece of Groupon globally, which is cool to see in a short period of time.

“Ireland is a great talent market. We’ve built an amazing team of very high-quality talent in this office and don’t see that changing.”

What is changing is the structure of Groupon itself. Williams points out that email-driven push notifications account for a third of Groupon’s overall business today.

“Now as many people come to the site and search for something and end up buying deals as come through the email channels. That’s the marketplace model at work, people are hungry for a restaurant deal, or a haircut or a massage.

“The bigger piece is the density of our inventory of deals and that’s the goal of having a marketplace, a really rich inventory with more ways for consumers to find what they are looking for.”

Championing the local business

The other side of the coin is, of course, the merchants themselves, and Groupon has built up considerable data-driven tools to help them shape deals and make money.

“We have tools to help businesses craft a deal by estimating their inventory, structure deals that will work for them and that customers will buy.

“Data is at the heart of what we do and it is one of the biggest advantages that we have. As our competitors have slipped away we’ve leveraged the power of the data that we have so that we are crafting deals that 80pc of the time merchants will make a profit on.

“We work with merchants to a level where we can help them understand variable costs; if you are a restaurant, build a custom menu at a price that is competitive in the local market. We can get pretty granular and have built up lots of expertise in working with small businesses. In fact, it is a lot easier as a business to get set up on Groupon than it is to buy Adwords from Google.

“The vast majority of people who open a pizza place just want to make great pizza or, if it’s a bike shop, actually ride the bikes rather than sell them and that’s where we have built the expertise and we have people that can help them.”

Williams says that mobile, location and context will be the bedrock of Groupon’s offerings into the future.

“Mobile is at the core of our business. It’s about empowering merchants to provide differential experiences based on two things: location and context.

“That’s where we are spending our resources and engineering efforts to get really sharp around preferences, context, time of day and location. For example, you can be sure someone in a city centre will be hungry at 11.45am and may already be thinking about finding a restaurant.”

But, ultimately, Williams sees Groupon leveling the playing pitch for local businesses all over the world, helping them to carve out something unique and bring in customers open to new experiences.

“There is a huge passion for local inside Groupon and that’s a big piece of why I’m here and why I joined the company in the first place: local businesses winning matters a lot.

“If you live in city or village, what makes it special? Often it’s the pub, the coffee shop, the relationships people have.

“Groupon has sent tens of billions of dollars to local communities around the world and I think you need some big ‘enablers’ to make it happen for local businesses.

“At this point, we are one of the few focused on enabling small businesses to win.”

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years