The website sold tickets for Underbelly shows at the Edinburgh Festival Fringe and Edinburgh Comedy Festival, and will sell tickets for E4 Udderbelly Festival at Southbank Centre in 2012.

Check it out here.

I can only assume these analysts are either related to their chief executive, Andrew Mason, or already-private share-holders hoping to capitalise their profits when the shares go public. Because I’d argue that the company is worth less that 4% of that.

On-demand internet music service, Spotify, recently raised funds that in essence valued it at $1bn. A far fairer figure, although I would argue still too high for a company that has yet to record a profit.

However, Spotify is doing something new. It’s also got a lot of public good will, and has negotiated some hard-to-come-by rights contracts with the 4 big record labels.

If ever there was another company primed to start a dot-com bubble burst, it’s Groupon.

And to realise it, you have to delve a little deeper than the company’s spin. 50 million email subscribers may sound attractive. But when you work on industry open rates of 10%, (estimated, as even to businesses they’re working with, Groupon don’t publish their email-open-rates), 5 million people worldwide opening an email everyday seems like far too small a fish in a big pond.

How it works for business.

As a business you offer a large discount on a service, product or package (at least 65% off). Groupon sells vouchers on your behalf.  Groupon takes a 50% fee (it started at 10%, but now the company has grown, it argues for a higher fee). The business ONLY gets money for the vouchers that are actually redeemed (Groupon takes 100% of the money for the 20% or so of unredeemed vouchers).

It’s about the marketing

As you might have guessed, I have a little more insight into Groupon’s working practices than the average subscriber. Having been on the receiving end of their sales spiel more than once, I know that Groupon’s argument to businesses is that you should treat the money you’re losing on the discount you give, as a marketing spend. Apparently being their main offer is equivalent to marketing worth £25,000.

However, as a business, it pays to look far harder at both the small print AND the customers you get.

There are many other services in the marketplace doing the same thing – Living Social, KGB Deals and Kelkoo Select to name the main ones.

The difference? Groupon are far, far pushier.

As a result, they generally negotiate a lost-leader deal with the businesses they work with. A product which after the hefty 50% fee is taken, is worth far more than it’s being sold for.

Now as a customer this sounds like an attractive proposition, right? Wrong.

No such thing as a free lunch.

Firstly, the ‘normal cost’ of the deal before the discount will be far higher than you would ever pay. It seems the Competition Commission have yet to clamp down on third-party agents citing increased ‘before’ prices.

As a business, I’ve been actively encouraged to add on every possible booking fee, choose the most expensive starter and main, and choose a stalls seat with extra leg room, to make the ‘normal cost’ of the deal as high as possible, to make the 65% discount easier to achieve.

Secondly, customers aren’t stupid. They know that you pay for what you get. If a restaurant has a room full of customers and half are paying £45 for the same meal Groupons are paying £10 (£5 after commission) for, they’re going to treat the £5 customers differently. Read: inferior ingredients, quick turnover times, and shoddier service.

Thirdly, as a Groupon customer, I’ve been on the receiving end of what happens when businesses over promise. I purchased a voucher for Hydrotherapy. When I tried to redeem, the closest appointment was in 3 months time, which later got postponed. The company couldn’t handle the amount of customers. I eventually got my Groupon refunded. Hardly a good reflection on the Hydrotherapy company and their ‘£25,000 of advertising’.

Bad customers

Is there such a thing? The customer is always right surely?

Wrong.

As businesses, and especially marketeers, one of our biggest challenges is increasing the customers spend each visit. Yes, offering a huge discount may get hundreds of new customers through the door.  But the only possible reason you would offer a loss-making deal is in the hope that those same customers will come back as full-paying repeat-customers.

They won’t.

What you inevitably end up with as a result of selling a Groupon is a dented budget, a cheapened brand and 1000 new fair-weather friends. Discount seekers will always be discount seekers. I should know – I am one.

Bad for business

From our experience of running a super-cheap Groupon offer, with the sole (loss making) goal of attracting new customers , these ‘new customers’ were effectively wedding-crashers. They anonymously appeared each night, with no actual interest in the ceremony on offer, drank the cheap drink, and left without leaving their number (Groupon keeps all the customer data).

Hardly a basis for building a brand.

Copied by some, bettered by everyone.

From a business’ point of view, there are many more companies offering better service that Groupon, on the market.

For example, Living Social (in 2^nd place in the UK market), shares the unredeemed vouchers with the businesses they work with. This means a revenue increase of around 20% on each deal, and for most companies means the difference between a loss-making and a break-even deal.

Time Out Deals – a newcomer to the market – is ideally placed to offer daily deals to it’s already huge customer email database, who are far more interested in entertainment than Groupon’s.

Apple was granted 563 patents in 2010. How patentable do we think Groupon’s model is? Hmm. Selling things at a discount. Hardly groundbreaking. According to this report Apple is now worth over $300bn. Are we to believe that this 35 year old market leader, owning thousands of patents, is worth a mere 12 times the 2-year old Groupon? Apple reported profits of $6bn in the last 3 months of 2010. Groupon lost $413m last year.

Trust your instincts.

I won’t lie. I’m quite new to the stock market. But one of the most useful piece’s of advice on investing in the stock market comes from my Dad.

‘Really research the company. What do they actually own? What’s their profit history? What do you think of them as a customer?”

In true Groupon style, I’d take that IPO of $25bn and slash 90% off.

It was good, but it got me thinking about how marketing on a shoestring can actually be more exciting that marketing with a larger budget. You have to be more creative, pull more favours, cultivate more relationships and have a closer relationship with your customers. And it got me thinking about the marketing tools your potential employer would expect you to use.

The first thing on everyone’s lips when you mention marketing on a small budget is social media. It’s almost a given right?

I’m struck by how blinkered a view this is. It’s a trap I’ve fallen into. I have a Facebook profile, I log on two or three times a day, and probably 90% of the events I’ve attended (in real life) or organised in the last 3 years have started with a Facebook invitation. Does that mean that it’s a great marketing tool? Certainly. But what about the people who aren’t on Facebook. How do I reach them?

It’s easy to think that everybody’s on Facebook. Yes – soaring towards a billion profiles, and most of the UK population. But is it disproportionately used a lot by a few? How many people actually engage with the content? How many people post notes, blogs and link to news stories? My (strictly unscientific) survey of my friends concludes that only about 20% of them actually regularly link to something external or recommend an event or product. I know some of my friends haven’t posted in months, merely read Facebook like another site.

So nearly a billion accounts – yet I’d have to surmise – a large proportion lying dormant.

Also, as I scan down the full list of Top News (the information that Mr. Facebook deems that I will find relevant), I’m struck by how many organisations and businesses make it into this list. Surely as time goes on, and I ‘like’ more pages and sites, my feed will become little more than a spam list.

All this leads me to wonder whether Facebook is another bubble that will eventually burst.

Then there’s Twitter. Again – awesomely simple in concept, brilliant in execution, but as a recently signed up Tweeter, I still feel outside the club. I tweet to my modest amount of followers, thinking that they may be interested, but I find it’s harder for them to engage with my content. Maybe I’m not tweeting regularly enough.  Maybe I’m not using #hashtags or @profilenames in my tweets enough? Or maybe (and I think probably) I’m just not confident that my tweets would be interesting. They’d be tantamount to amateur reviews – like the hoards of tweeters who I’m sure would irritate me in real-life, yet I still follow.

Twitter, for me, seems like it’s great for people who have the time and inclination to put a lot into it. Like anything, the more you put in, the more you get back. But for most of us – who dip into lots of different media, who are a little less confident that what we have to say merits being put out permanently into the ether, it’s just too hard to get excited about.

Which brings me back to marketing. What chance do I have to sell to these people amongst they plethora of other messages they’re already receiving. When do the News Feeds or Tweets they’re reading become so full of advertising messages that people switch off, or find another medium. I reckon on it being very soon.

And how effective is Twitter or Facebook at actually selling tickets? Sure, you’ll probably attend a show your friend is performing in. And it’s great at spreading the word between PRs, industry bods, reviewers and the press (and anyone else who would normally expect a comp on press night). But normal people who queue up and purchase an actual ticket in the real world?

I’m yet to be convinced.

The iconic purple cow is instantly recognisable, and the refreshed design for Violet the Cow is currently featured in advertising across London, outdoor and online.

You can view the full programme and find out more here.

An innovative scheme, the idea is that you can hire someone who is not only intelligent, capable (and did I mention has a full driving licence), but is also like having a friend around to give a pair of extra hands.

You can look at her website here.

It was created by my partner, Richard Jarmain – an excellent software designer (amongst many other things) and I.

It’s an invaluable tool to companies bringing a show to the Edinburgh Comedy Festival or Edinburgh Festival Fringe each year.

Featuring a score by the Hallé Orchestra, under the instruction of Sir Mark Elder, it will be directed by Braham Murray OBE.

You can take a look at it here.

Starring Tom Chambers and Summer Strallen, you can view the website here.