Tippr vs. Groupon. It sounds like a mismatch on paper.
Groupon is the Chicago-based goliath of online “group buying” that seemingly came out of nowhere to raise $135 million last month at a company valuation north of $1 billion; at last count, it had some 270 employees. Tippr is the Seattle-based social discount voucher site that got started in February, led by entrepreneur and investor Martin Tobias (pictured above right), and has about 20 employees. The key is, it’s trying to play a different game.
This week, Tippr is expanding beyond Seattle to a total of 10 cities nationwide, including San Francisco, Los Angeles, Chicago, Boston, New York, Washington DC, and Atlanta. In terms of the number of local markets, Tobias says that puts Tippr at #3 after Groupon and LivingSocial, and just ahead of BuyWithMe, another group buying site.
But I wanted to drill down into why Tobias thinks Tippr really has a chance against the likes of Groupon and other big competitors. “Tippr has the most extensive and deep patent portfolio in group buying,” he says. It’s what he called “the pocket aces of IP,” the last time we spoke. Those patents come from Mercata, a failed Paul Allen-backed startup from the dot-com era, and they cover things like price optimization, demand curve modeling, and buyer-seller interaction models. (Tobias was non-committal when I asked whether he thinks Groupon’s offerings infringe on Tippr’s IP—but he didn’t say no.)
OK, that all sounds pretty abstract. What Tippr does is offer discount vouchers online for local stores and services, such as restaurants, hair salons, and cleaning and repair shops. As more people sign up, the savings per consumer increases, in a process called dynamic pricing (or an “accelerating deal”). Tobias says Groupon and LivingSocial don’t have that. “We bring new features to the market,” he says.
Tippr also seems more focused on small businesses than its competitors are. “We’re in the business of helping merchants, rather than just making ourselves a buck,” Tobias says. “It’s such a big win-win for both the consumer and the merchant. It is a great business model.”
More fundamentally, he says, “Groupon is building a brand. We’re building software.” What he means is that Groupon has positioned itself as a consumer brand and category leader, and other competitors are playing catch-up. Tobias says he is trying to capitalize on a different model and approach. “Tippr is creating a platform to allow other publishers and other providers to be in the daily deal business,” he says. Seattle Magazine, for example, has formed a partnership with Tippr to put a “deal widget” on its website so its readers can see daily deals. Tobias says this sort of affiliate relationship will help drive Tippr’s traffic in the next three to six months.
Tobias also counts his previous CEO experience as a competitive advantage. The former head of Seattle-area companies Imperium Renewables and Loudeye Technologies—and Kashless, which spawned Tippr—points out that Groupon used to have expiration dates for its vouchers, which he says is illegal in 28 states and led to a recent lawsuit in Illinois (which was settled last month). “At Tippr, there are no expiration dates,” Tobias says. “We follow all the rules.”
