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LinkedIn’s Reid Hoffman On Groupon’s Big Advantage: Big Data

FC: Big data is also why you have faith in Groupon 

RH: Yes. There’s two points on which a lot of the discussion about Groupon misses key insights. First is what exists with Groupon today: both scale and data. Data becomes important because of the scale. If you look at the core service that Groupon built on, it’s: Here are some offers that may motivate you to act today. That’s interesting enough for you to plunk down the money.

As the activity in this space gets denser, it becomes important for [deals companies] to maintain their value proposition, both for the merchant and the consumer, and to be able to match the right two. The ability to do that kind of matching, off the data, is the kind of thing that has a robust, at-scale, defensible value proposition and makes it harder for other people to offer products that are as good.

I also think people discount Groupon’s ability to build new value propositions. Groupon launched Groupon Now. An ability to raise my mobile phone and say there’s a 20 percent off offer two blocks from you in the next hour is actually pretty useful. And that’s a value of scale.

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One of the challenges in networking is everybody thinks it’s making cold calls to strangers. Actually, it’s the people who already have strong trust relationships with you, who know you’re dedicated, smart, a team player, who can help you. Even college students have professors, family friends, alumni of their college. Your network is the people who want to help you, and you want to help them, and that’s really powerful.
What’s happened is that since most of your college kids have been in very structured environments, they don’t realize that what’s really essential is the network. They’re like, oh, my friends, they don’t know anybody. The actual answer is they might.

Reid Hoffman, LinkedIn CEO