At a superficial level, most consumers consider Groupon to be a neutral locator of excellent deals and promotions which simply connects two entities with each other - the business and the customer. It all seems very win-win, the customer gets a bargain deal, and the business gets some custom which it otherwise wouldn't have had, useful mainly for its advertising function.

This two-way dynamic occupies much mainstream media attention on Groupon - such as, for example, a recent Weekend magazine feature in the UK newspaper, The Guardian, which highlighted Groupon as 'the fastest growing company in the history of capitalism' (according to a recent Forbes evaluation). When considered from this perspective the main emphasis is often placed on the dynamics of consumption, as in; does a service like Groupon just exploit our endless desire for consumer products and services - even those which we previously didn't think we wanted or needed (but now, sensing a bargain, are tempted to try).

In other words, just because something is very cheap - would you always buy it only for this reason? Is the financial cost to you the only concern we really pay attention to? For example, I don't really like Coca Cola - but, if I saw cans of the drink priced at the discounted rate of 10p here in the UK, would it be enough to drive me to an act of consumption I previously would have showed no interest in? When does the desire for a bargain become the primary driver of our consumption, beyond more instrumental considerations and assessments of our needs. Consider this exchange:

Person A: 'Guess what! Last night I went to X  and bought a Y for only $40!!! They normally cost $95 - what a great deal I got.'
Person B: 'Oh cool, but what is a Y? I'm not really sure what they do...'
Person A: 'It doesn't matter what it does - I'm not really sure myself - but it's worth $95 and I got one for $40!!!'

Slightly contrived I know (please excuse my playwriting skills), but in essence the exchange is not a million miles away from ones we're all familiar with from our daily lives.

The core dynamic of the bargain is often about the customer feeling like a unique opportunity is presenting itself, and that they have nothing to lose (even though they must still pay something for the object) just because the discount is so drastic. What if Groupon started offering raw iron ore at the drastically reduced rate of $20/tonne? Would people go for it?

So, this normally is the first issue raised with Groupon, which complicates the most immediate image of it as a benevolent safeguard of consumer value. But there is of course nothing unique in offering discounts or deals to get customers to purchase more than they initially intended (check your local supermarket for example, or various high street retailers with their multibuy deals). The general discussion above could be applied to the dynamics of consumption in most Western capitalist societies and Groupon is only one small piece of the bigger picture (which existed since economies of scale came to dominate retail business models, well before Groupon ever came along).

However, a more interesting perspective on Groupon emerges if we reconfigure the two-way understanding of consumer-business (with Groupon standing in as the neutral dash that connects the two). Instead if we insert Groupon as an actor in its own right, equally driven by economic considerations, as is the consumer and the business owner, then we get a much more accurate and interesting triangular perspective on how the whole thing works - and who the real winners and losers are.

That is basically the position adopted in an excellent guest post on Techcrunch today, entitled 'Why Groupon is poised for collapse', which scrutinises in detail Groupon's business model, and the terms which it offers the businesses that it works with. Now, while the post is probably a little bit too condemning of Groupon (after all, nobody is forced to sign up), it does reveal the extent to which many small businesses can actually suffer in the long term from their involvement in Groupon, despite the obvious short term advertising benefit of running a deal.

Anyway, both articles (Guardian and Techcrunch) are worth a read in detail for differing - and by no means mutually exclusive - perspectives on one of the web's most recent monster success stories.

While both Techcrunch and 'Huffpost' can be described as blogs - indeed it is exactly what they are - there's something about the connotations of the word that render it somehow simultaneously inappropriate as a label for the two sites. This, I think, stems from the fact that popular conceptions of blogging have not yet caught up to the ever-present reality that, while 'blog' can mean an online method of voicing personal thoughts on this or that for free, used by millions of people the world over - it can also be something much closer to a more mainstream media organisation such as a national newspaper (albeit without the print version).

What the two recent AOL deals illustrate perfectly well is that while the blogosphere is extremely diverse, densely populated and often operates with a certain (relatively loud) background hum (i.e. it is sometimes hard to notice the good stuff simply cos there's so much out there) - there is real potential for established blogs, usually with teams of professional full-time writers and all the other things that you'd find at any 'traditional' print title (newspaper or magazine), to rival print titles not only in terms of reader numbers and advertising potential - but now also in terms of the economics of mergers and acquisitions.

Of course Huffpost and Techcrunch wouldn't have come with such a price tag if they didn't have all those readers - and they wouldn't have all those readers if they weren't doing something right. That thing most likely is a recognition of the importance of maintaining a certain standard in the quality of their output. This is done by genuinely sourcing stories (rather than simply commenting on what others have noticed or found out) and observing some sort of professional stance towards referencing etc. (N.B. I'm more of a Techcrunch reader than a Huffpost one, so my observations are more derived from the former - though I belive they hold for both - and also various others out there...)

This is not to say that mistakes don't happen or that daft stories don't get published - but just that, by having in place a mechanism for sourcing, editing, and referencing which approaches some way towards being on a par with quality newspapers or magazines (I'm not talking about the tabloid press, which - at least here in Britain - often falls well below any respectable benchmark for professionalism and self-regulation), Huffpost and Techcrunch have also been able to rival/match more traditional media in terms of authority and reliability. These really are the two values which then translate to great user stats, advertising potential and big takeovers. No matter how good your CEO staff are, they can't really do much if the authority and reliability of the content is constantly questionable, imprecise or derivative.

So, with these two high profile blogs proving that such qualities which used to be solely the preserve of print media are now entirely attainable online if one sets up to do things in a certain way, perhaps it's time that the popular perception of blogs were updated somewhat to reflect this new situation. Today's $315m deal, and the deadlines it is inevitably attracting will probably go some way towards this. Finally, it's surely a good thing to see that blogging remains a media format where the refreshingly low barrier to entry doesn't necessarily imply reduced potential for reach, growth, and success.

Here are the seven points she discusses - though, it should be said, they sound a bit vague and general when taken out of context like this so it really is worth reading the original piece for yourself. Anyway she organises the main issues under the following headings:

1. Design your product to matter in a world of infinite supply
2. Be the best in the world at one thing
3. Seek out uniqueness
4. Focus on your most important interaction until you have it right
5. Choose your words carefully
6. Create a party, not a museum
7. Develop relationships, not features

Once I'd finished reading the original piece I decided to apply some of these points to concrete examples out there. Indeed when one thinks of the most successful social networks out there Bianchini is good at pointing out exactly how each of the above principles translates to these products (she uses Twitter and Facebook mainly), though it would be equally interesting to consider failed ventures from this perspective, for there are valuable lessons there too I think.

So, I got to thinking about something like Friends Reunited (which was one of the hottest properties in the social networking sector a few years ago when ITV bought it for $208 million in 2005, but since fell away and was sold last year for only $35 m) and Friendster (another formerly very successful SN, but now declining rapidly in traffic and only really enjoying success in Asia). N.B. I only chose these two to provide a couple of interesting examples for discussion - they are far from being the only ones to have experienced such fortunes.

In terms of Bianchini's key principles therefore, how can we understand the failure of Friends Reunited and the current decline of Friendster (which doesn't of course mean that it is finished for good as a SN, just that it is currently needing some re-direction)? The short answer in both cases is simple: Facebook. But this doesn't really explain what happened, or why Facebook was able to succeed in taking users off both platforms so effectively.

Take the first point Bianchini raises - 'design your product to matter in a world of infinite supply'. In essence this simply means being aware of the huge competition that exists out there for social network users' time and attention. So, at a fundamental level, the decision to charge users something like $10/a year to use Friends Reunited was a huge mistake (albeit easy to see in hindsight). It ensured impressive profits early on, but by the time the network's owners realised that it represented a disastrous long-term policy it was too late - Facebook was growing at an unstoppable rate, dwarfing Friends Reunited's meagre increment of users.

Since critical mass is so key for social networks (i.e. it's not just what you want to use - it's what those you want to connect with already use), it's now clear that the pricing policy was one key aspect by which Facebook was able to seize the initiative regarding network critical mass.

Bianchini also says 'be the best in the world at one thing' but if one looks at Friends Reunited, even now, there are multiple functions offered by the site (Friends Reunited Dating, Genes reunited etc) which seem to divide different facets of users' experience in an unnecessary manner. Facebook doesn't need a 'family finder' service for example - or a 'dating service' etc. The former is integrated into its normal operation, while the latter is to a point (you can do some things which dating websites also offer), but, importantly, neither is a key feature of Facebook marketing or brand image.

The problem with Friends Reunited in this respect is not that it does too many things - but that, in trying to attract users on the basis of all these services, it instead only confuses and sends a mixed message as to what it's for. This is not the way to 'be the best at one thing'. Diversification is of course a useful business strategy - but you must first lead in one particular field, before you can successfully diversify into others.

Turning now to Friendster briefly, the key change in dynamic undergone by this network recently is the focus on a specific part of the world (and language group) as an attempt to 'be the best at one thing', in the wake of decline in popularity in Western and English-speaking markets which began a few years ago. In response to this Friendster changed tactics, adding support for 10 new Asian languages between 2007 and 2009 and thus becoming the first network to support all major Asian languages.

This now represents their single greatest strength, around which other features are orientated (such as the focus on gaming for example). The point is that there is an attempt to create a core product identity around which a diverse range of other services can be built. Whether it will be enough to save it from the march of Facebook is another matter - at the moment it is certainly holding its own in the Asian market at least.

I could go on here - for example another of Bianchini's points ('create a party, not a museum') relates to design strategy, highlighting the current preference for clean and unobtrusive design, which allows the actual content users are interested in (photos, messages, profile info etc) to be foregrounded. Again here, Friends Reunited seems to be making multiple errors from the fairly 'busy' interface (this was also a problem for Myspace as it lost ground to FB over the past 2 or 3 years) to the choice of colour scheme (blue, as Bianchini highlights, is pretty much 'played out' - i.e. Facebook - so why use it as the single defining colour in the case of FR?).

Anyway, all this isn't designed to rip apart the efforts of a company that once represented one of the most successful social networks in the UK (and indeed also Australia and New Zealand), and did much to develop excellent technologies and products. Instead, I hope the discussion illuminates something of why certain networks seem to gain the upper hand over others - and consequently why Freinds Reunited's initial success wasn't as permanent as its owners would have liked.

The ultimate point is that of course the social networking market is always subject to external influences (like every other market): in this case things like technological changes can dictate the direction of development for a SN (advent of smartphones for example), or political factors can influence market dynamics (censorship in China means that companies must make an ethical decision about whether to operate there) to give a couple of examples. While this is often clearly out of the hands of developers, the key points discussed by Bianchini are certainly not - and it is that that makes them worthy of attention.

Basically, a third party-designed Chrome extension has finally made the breakthrough of enabling full porting of Facebook friends' email addresses into your Gmail account. It worked (tested by TC) for about 10 minutes after their post about it went up - and has since ceased to function. Sounds a bit dodgy doesn't it? There's no confirmation yet of whether this is down to a block from Facebook or something else entirely though, while the app is strictly unaffiliated with either Google or Facebook, it is clear that it is the latter whose views on data reciprocity are questioned by the extension - so a Facebook block is hardly an absurd assumption to jump to.

I find this whole episode rather interesting in the context of some comments made by Tim Berners-Lee (inventor of the web, inasmuch as it could be attributed to a single person) last week, in which he stated that the creation of 'closed worlds' such as Facebook (who generally seek to minimise data reciprocity unless it directly benefits them - regardless of what users would like) risks 'fragmenting' the web and generally undermining the principles of openness which, he believes, are key to what the internet has to offer for innovation, creativity, democracy and so on.

Well, it seems that Sir Tim's arguments of last week have now been provided with yet another concrete example around which they can be discussed and understood. After all, if we're honest, we all know that a Chrome extension such as the one in question here weakens Facebook's position in its competition with Google. It is understandable therefore that Facebook would want to protect to some extent the uniqueness of their position (controlling the data and social networking of a staggering 600million users) since their entire significance is based precisely upon these two attributes - the data they have access to, and the number of people it concerns.

However, in this case, the data in question here (users' email addresses) can in no way be seen by anyone, including Facebook, to belong to the network. As the simple caption from the extension's designer makes clear below, Facebook have little justification for their position on this aspect of data reciprocity, other than fear of Google and the desire to maintain their exclusive position as sole handler of people's online social networks: there is no benefit to users in having porting to Google denied, is there?

This is where Facebook treads a fine line, and one which even their huge success cannot insure them against the pitfalls of getting wrong. Even though this represents just one small spat in the overall picture, I can't help but feel that it signals the aspect where Facebook could become increasingly weak against other competition - in terms of its privacy policies (see Diaspora for example), data reciprocity and so on. In other words, Facebook becoming one of Tim Berners-Lee's 'closed worlds' could slowly but surely begin to count against it - because, while it might be good for the monetization potential of the network, the truth is that nobody wants to spend their time in such limited and restricted spaces - online, or not.

Carpenter identifies three ways that consumer internet companies can make money, providing at least one of the following a) Media b) Paid content or c) Physical commerce. This is kind of a common sense starting point, but works very well as an introduction for what follows - which is an analysis of 13 different business models for doing the above. These are:

1. Search
2. Gaming
3. Social Network
4. New Media
5. Marketplace
6. Video
7. Commerce
8. Retail
9. Subscription
10. Music
11. Lead generation
12. Hardware
13. Payments

There is then a very clear and informative example and breakdown of each of the above models. Now, often the case is that actually successful start-ups make use of various hybrid versions of the principles Carpenter discusses - but the only way to really understand why these hybrids work is to first look at the individual components from which they are comprised. After reading the article, consider for example a service such as Spotify, which makes money by offering both a) Media and b) Paid content, and utilises metrics from a number of the above models (Music, Subscription, and Retail).

I won't go into the details of the posts any further since it really is worth reading them in full over at Techcrunch (there's two parts: I & II). Suffice it to say that if there's any business out there that you've always been curious about financially (i.e. how and why it works - or doesn't), these excellent posts from TC will provide a great tool for helping work out some of those mysteries, either for anyone who isn't specifically from a business background - or indeed anyone who simply wants to keep up to date with the models and principles which are currently being employed successfully.

First up, it's worth mentioning that the massive gaming expo that is/was Gamescom 2010 went off this weekend with excellent attendance figures, leaving the blogosphere buzzing with anticipation about some of this autumn's forthcoming titles. By the looks of it, the last quarter of the year, as well as the first one of next year should be pretty solid for the industry - with some sure-fire releases drafted for the Christmas run-up. For some top-notch summaries of all that you missed (if you weren't able to make it down to Cologne over the weekend) be sure to check the Guardian Tech feature on the event, and also Gamespot's in-depth coverage.

Next, I just wanted to draw your attention to a post on Techcrunch today by MC Siegler, on the way Facebook Places might change the way people approach their social graphs on the network. Some readers may remember that this was something I was discussing last week, in relation to the question of users becoming more selective about their Facebook 'friends' now that Places has been launched. Well, MC Siegler raises an excellent point on the same topic - and one which I hadn't considered last week: the possibility of introducing a two-tier 'friend'/'follower' system to Facebook's social graphs, so that you don't have to cut off all ties completely with people you only know a bit (but wouldn't like to engage with via Places). This sounds like an excellent idea to me, and I'll be following with interest whether or not Facebook agrees (and implements such a system).

Now, after all that serious stuff, here's a mildly entertaining SEO story (I know that phrase sounds odd - but it's true). Basically, UK newspaper, The Daily Mail, has recently advertised for a new SEO technician for their online content. The interesting part is the fact that they didn't put the ad in any of the places you or I would look for it - but instead in their website's robots.txt file (which, in theory, only uber-geeks would be frequenting - exactly the skilled types that the Mail is after for the position). It's not often that SEO generates curious little headlines as this episode has done, so if you have any interest in the subject - be sure to check it out.

Anyway that's your little round-up for now. Before I finish, one serious warning: anyone that uses Paypal should check out the info about a recent large-scale phishing scam, which has seen users robbed of thousands of dollars. Despite initial fears that Apple's iTunes was to blame for the breach, it seems that this is now not actually the case - either way, check your security and beware the phishers!

For more detail, see the aforementioned TC blog, with results of their trial experiment of Places. The general gist however is that, unless you explicitly opt-out of Places, you are actually 'in' a little bit - just not anywhere near as much as if you have actually opted-in. It's probably a little less straightforward than most users would have liked, but it's only normal I suppose for a new feature to cause a few misunderstandings until people become clear on how it works (though it'd be easier if Facebook was a little clearer on these things, instead of Techcrunch having to work things out and actually tell it like it is).

The second point that I feel is worth discussing, even at this early stage of Places (day 2 since launch) is the actual positive potential of Places, which is not perhaps getting as much attention as the privacy and safety side of things. Nonetheless, some key commentators have been quick to recognise that Places is finally the feature that promises to make Facebook truly social - in the pre-web 2.0 sense of the word. In other words, it might actually be the feature that finally brings people together in a physical, face-to-face - social - sense. Surely that is, generally speaking, a good thing?

After all, if you're worried about unwittingly bumping into people, via Places, that you would otherwise not like to see, then maybe it's time to ask yourself: why am I friends with this person on Facebook? Maybe the potential intimacy and proximity of Places will prompt users to actually consider treating the word 'friend' on Facebook as having the same meaning as it does on 'real life' - i.e. being a bit more selective about how they build their friend networks. If we're honest, probably at least 50% of our Facebook friends are people we don't really communicate with that much - so what's wrong with Places, encouraging people to be a bit more selective in building genuine friend networks, rather than simply amassing hundreds of one-time acquaintances?

I personally quite like the idea of Facebook becoming a facilitator of physical social experience, rather than being just a virtual channel of communication. I like that the feature might alert me to when some of my friends are going to the same gig as me, or happen to be visiting my part of town - it means that, if we want to (but note: we don't HAVE to), we can meet up and hang out. Surely all the critics who bemoan social networks for eroding youngsters ability to communicate in person would recognise this potential of Places as having a positive aspect?

Anyway that's all for now - don't let the scaremongering security stories get the better of you, Facebook Places does need to be carefully implemented and users need to be fully informed of how it works and can be used, but essentially as long as common sense is present on both sides (FB and users) then Places has the capacity to be the first properly social (in the old-fashioned meaning of the word) feature of any social network out there.

(N.B. I know Foursquare has been doing something similar for a little while - but FB's size renders Places a slightly more significant - if partially derivative development).

However, there is also one other significant detail about the Web Store, which is already worthy of some serious discussion - and that is Google's pricing and revenue models for the product. Initially a 70/30 developer-Google revenue split was expected (similar to Apple's app store model), though Google have since confirmed that their slice of the pie will now actually only be 5%. This is quite a considerable strategy decision which has clearly been made at some point during the development process.

I find this especially interesting in the context of some recent discussion and posts we had on this blog last month, about Google's emphasis on value-for-money in the mobile market, both for consumers and developers, which has arguably been one of the reasons why Android is continuing to grow very impressively in terms of its market share. In essence what we discussed back then was that Android boasted the highest proportion of free apps, as well as having a relatively competitive average price for its priced apps, unlike the app market leader, Apple, whose apps typically cost much more and were less likely to be free. This wasn't intended as a criticism of Apple (they have a splendid business strategy in the app market - tailored to work for them), but more as an observation of one key area in which Google has identified that it can distinguish itself and win users in such a dynamic and crowded market place - to which it arrived later than many rivals.

Well, it seems that the lessons of Android's success (fast growth and market penetration IS achievable by the deployment of serious financial incentives for users and developers) are now being applied to the Chrome Web Store. The folks at Google are clearly aware that in terms of corporate economies of scale, they are sitting at the helm of the super giant of the industry sector, and you don't need a business MBA to know that such companies often maintain their position by offering good value-for-money to customers, as they can afford to implement price cuts that squeeze out smaller competitors.

To return then to the Chrome Web Store, I expect that the considerable incentive offered to developers by the low 5% cut will yield impressively rapid growth in the number of apps available, and likewise in the number of users purchasing them (who will probably also feel the benefit of Google's low cut in the form of cheaper finished apps). In other words, I expect we will see some overlap with the way Apple's iPad app store works for example in terms of interface and app types etc, but also a considerably contrasting revenue model driving things behind-the-scenes. Anyway, that's about all we can say on this for now - more details and comment to follow as the launch approaches.

Now, for a company which spends a lot of cash trying to look nice in expensive TV adverts, this is rather a bad bit of PR. Furthermore, Apple is now finding a bit of downside to the considerable media clout that its activities command with a number of prominent and mainstream media sources directing their focus to the company's blunder.

In particular, Jon Stewart has done a piece about the story on his Daily Show, lambasting Apple for their draconian raid on Jason Chen after it was their own error which resulted in the phone being lost in the first place. Perhaps even more interesting is the Techcrunch analysis of the comic segment - which highlights the danger of this mainstream criticism for Apple, as opposed to the blogosphere critiques that it can easily ignore most of the time.

As the saying goes - live by the sword and die by the sword, and indeed no-one will be more aware of this right now than the Apple branding and marketing team who must somehow undo all the bad press that this initially trivial incident is now generating. As a potential legal dispute looks set to unfold in coming days (with Chen recently hiring a lawyer) it looks like the story - and all the surrounding bad press - won't be going away any time soon for Apple. I bet the careless developer who lost the phone has never had a hangover as horrible as this one...

Dejan Levi

Click over to TC to view the full clip - you could do a lot worse than spend 20 minutes to hear the thoughts of a man who will go down in history as having started it all...

Dejan Levi