Is Groupon a good investment? The regulatory offering says Groupon plans to sell shares at $16 to $18 dollars each on a valuation of 10.8 billion, far less than the 20 billion it originally expected. But is 10.8 billion even accurate? Google was willing to pay 6 billion for Groupon and based on the current business model perhaps this offer should have been more seriously considered.

When I first heard about Groupon, the company aimed at providing daily deals in localized markets at 50-90% off normal retail prices, I was curious. So I signed up. But growing up as a consumer in a very savvy coupon market I found the Groupon offers unappealing and eventually I coded the “daily deal nuisance” to my junk mail. Now don’t get me wrong, my blog entry is not intended to knock Groupon, I actually think there is something here but in its current state the business model has serious flaws.

Here are a few:

1. Groupon does not deliver repeat visits for retail customers
Retailers need to attract recurring revenue. Coupons are best used as a sampling mechanism. If the offers are right they can result in a repeat visit. If they are wrong there is a high advertising expense and no ROI.

2. Groupon threatens merchant profitability
Too deep a discount for some and redemption that cannot be controlled threatens merchant profitability. In the old days a retailer printed a finite number of coupons and this was important because he could build the redemption costs into his financials to ensure he could afford to send out such an offer to market. Understanding coupon discount economics is fundamental to profitability especially when high volume redemption might be the outcome. Some establishments can afford higher redemptions based on their business models while others cannot.

3. Groupon is very expensive advertising
A restaurant who gives 50% off a $40 dinner gets $20 has to pay Groupon $10. The cost of Groupon advertising is too high. Therefore because participation could put a stress on the establishment successful retailers and restaurateurs stay away from this product and those struggling sign up because they desperately need customers. If Groupon is attracting the bottom end how are its collections efforts?

Here are some suggestions on how Groupon could fix their business model ensuring a better product and better merchant participation.

1. Create a better consumer product through better value-added programs for merchants
Scrap the $10 money grab. Merchants should only pay once to participate and participation is the cost of their coupon offer. Create categories for merchants to ensure wider participation that is fair but which also sets value standards for consumers. Food cost is higher in a fine dining establishment than in a fast food establishment. So a 50% discount does not necessarily work in both. It is interesting to note that the public knows this, intuitively. The assumption is that a fine dining restaurant offering 50% off might produce a lousy meal or is going out of business. (Food for thought!)

2. Sell Memberships
Groupon should consider creating a club and selling memberships. This is where the recurring revenue stream could be found. People will pay for value. Wider membership distribution could perhaps be attained through partnerships with local in-market grass roots clubs and organizations who get a small percentage on sales.

I believe a revamped Groupon could be a success with the right leadership. But in the meantime the fact that the current management had to re-state their financials in and around a revenue recognition issue should be a wakeup call to investors to cool their heels as there is no fast money here just a lot of hype around what is essentially a startup.

Groupon would be best advised to retrench, reinvent and then relaunch with a value proposition that is supported through accolades from merchants and consumers.

What drives engagement through Facebook, Twitter and the social channels? When it comes to effective social marketing consumers want to know that companies are committed to a quality relationship and that they care. To avoid “unfan” “unlike” and “unsubscribe” marketers need to realize that the definition of “engaging” and “appropriate” varies by channel. This point couldn’t have enough emphasis given the fact that 50% of consumers stopped following a company when the posts were too frequent and too boring. There couldn’t be a better time than the present to extol the virtues of personalized marketing. Better still, start to implement as part of your social strategy. Here’s an interesting video on current social media statistics and trends.

It is a chaotic online jungle of companies, platforms, services, devices and behavior. Advertising based on who you are is creating a new breed of empowered, consumer renegades, hell bent on protecting their identity and valuable social networks.

With single access sign-in facilitated over a vast array of technological devices a whole new set of security and privacy concerns have emerged. Social networking sites more than ever must struggle with how to be more diligent in protecting our privacy. But can we rely on the Social Media giants like Facebook, Apple, and Google to educate and protect us from what we don’t know? Unfortunately none of them have had a stellar record when it comes to internet privacy issues.

This Christmas I received an email via Facebook from my friend Trish who had apparently bought a Louis Vuitton handbag and Rolex and Gucci watches for an amazing price on this shopping website she had discovered. The problem is that not only was the message strange coming from my friend Trish, but that she would send a message like this to me (knowing my serious allergy to the idea of shopping). To add to the mystery Trish confirmed that she had not sent the message and expressed shock that her entire Facebook group of friends had received this message.

If you have not had a look at the privacy settings for Facebook Apps in a while perhaps now is a good time. I was surprised to see how many apps I was signed up for which I had never heard of.

Perhaps you may think this situation is just a trivial annoyance, and on the surface this situation can appear as such. However, in my opinion it foreshadows the social networking hazards ahead for 2011. As a society we are just in the very infancy of social online networking which is about to explode ten fold over 3G networks at the hands of careless geeks and greedy marketers and merchants.

Welcome to the next computing era. The Mobile Internet. With 10 billion units connecting to the internet including: iPads, smartphones, kindles, tablets, MP3s, cell phones, PDAs, car electronics, home entertainment systems, games, and home appliances (to name a few), the social networking phenomena is emerging as the greatest privacy and security threat for decades.

Well, I don’t know about you but I think it is time to say; “bye, bye open source, social networks, email and cell phones. The party was fun while it lasted. I’m going back to my Walled Garden where I don’t have to worry about people pitching me (including life long friends) and where I can sip no brand tea, listen to cassette tapes, and renew my creativity.” You could say the “Groundswell” overtook me and I am on a temporary retreat to discover real authenticity.

New Social Media Trends point to a greater connectedness in 2011, though CEOs and our maintenance friends could benefit from some more friends, and funeral parlours need some ideas on what to tweet about according to NetProspex’s Social Business Report.  But the good news is if you are feeling lonely this New Years you can always move to San Francisco as apparently it is the most social city in North America. (Note: Cities with the largest boxes and red color are the most social).

Social networking sites are intricate, elaborate, complex and ubiquitous and everyone in business today needs to understand how they evolve and operate as the social revolution has changed the foundation of business forever. All companies need an inclusive Social Media Strategy that reflects the core of their business and engages all people in their organization including; employees, customers, and suppliers. Social Media is not just a profile on LinkedIn, Facebook and Twitter. A good strategy involves engaging people in a compelling way that leverages the network aspect of a social site. To build brand and achieve business success in this new paradigm you need to be human, memorable and encourage the transmission of information. There will be big breakthroughs in mobile this coming year as we social beings have discovered how we can be connected instantly to our personal networks wherever we are and wherever we go.

Despite the privacy backlash Facebook is receiving many businesses still believe that the popular social networking website is still prime location for promotion. But why are businesses relying on Facebook—and what can they actually get from Mark Zuckerberg’s creation?

Instant connections

For one thing, Facebook allows big brands to have an instant connection with their market. Nike, for instance, has over two million pages as part of its Facebook fan page. Forever 21, a retail clothing store, is also straddling within that figure. These numbers are hard to ignore despite the privacy rap Facebook has had of late.

Facebook has over 100 million users based in North America, almost one-third of its 350 million overall members, according to Socialmediaexaminer.com. That’s a lot of engagement especially when you factor in the how members share information with each other with a click of a button. This makes Facebook a prime venue for social marketing.

The key to developing a successful Facebook marketing strategy is to inspire a connection. Hard sell never works, especially on the internet. “Facebook is a place to make connections, not to buy products and services,” wrote CNN.com. Facebook should be used to inform, not to sell. It is all about engagement marketing.

Facebook Fan Pages

A Facebook marketing campaign requires a lot of hard work. As the CNN reporter wrote, a Facebook fan page for a business is not like a billboard or a poster as it doesn’t work unless the business tries to engage the network. This is true for smaller businesses that also need to engage to create brand awareness.

When Facebook pages are used like ads, they lose their charm. They also fail to attract users. Again, according to an article in the Socialmediaexaminer.com, a Facebook user only “fans” around two pages per month. This puts responsibility on the business to work at engaging fans.

An effective Facebook marketing strategy is for a business to offer something to their Facebook fans in order to attract engagement. According to Adage.com, the official Facebook page of Starbucks (which boasts over five million fans)  allows for user interaction as well as engagement with other Starbucks social media venues.

Privacy concerns

Should businesses be concerned over the privacy issues? While they do exist, PCWorld says entrepreneurs and business owners have nothing to worry about. There is only a small fraction of users who are leaving the networking website. Overall membership continues to rise.

“Facebook is not sinking–its going full steam ahead with or without you,” PCWorld.com reported.