Former Groupon CEO Andrew Mason on what the roller-coaster ride felt like | Hacker News Reader

Former Groupon CEO Andrew Mason on what the roller-coaster ride felt like

nymag.com

183 pointslxm49 comments

One key point in this - long term vs short term thinking.

I was a groupon user / and higher value to restaurants I'd like to think (ie, strong income, would go out to eat at a nice place, if I liked a new place I'd go to it more) but also someone who doesn't want a lot of hassle, time is money etc.

Groupon went from actually good deals, hassle free, to endless marketing emails / wall to wall shlock deals (50% off supposed $300/hr personal trainers? 20% off the latest MLM scam) and lots of scammy / scummy merchants who did everything they could to rip you off.

These dying places pulled every bogus trick. I'm sure there are cheap customers willing to fight through it all, but the money is probably in the folks able and willing to pay bigger $ just looking for an excuse to try some place new.

Then you read all the crap the groupon sales managers pulled to get folks on board (ignoring do not call, threatening bad yelp reviews).

Yuck.

I managed a bikeshop/tavern prior to my transition into tech and we did a lot of groupon promotions. Their sales folks were super greasy and it was almost impossible to opt out once you were in, whether or not it made business sense to continue. It was an effective loss leader at first, but sometimes we would get punished with a throng of grouponers at peak times and we LOST money in a bar. It was a greasy business and I never gave them a dime after I left that job.

Doesn't that dying-place-pulling-every-trick thing describe Groupon's arc itself?

I think of Groupon itself as one big pump-and-dump. I don't see that there was ever a long term for it, not outside of a niche business. Promotional coupons are not exactly a new idea. If Groupon had stayed small and figured out a way to bring businesses new customers that stuck around, it might have had a future.

But they used the power of the internet in exactly the wrong way. The internet can get you instant volume by getting many people to act in concert. But limited-capacity local businesses don't want a flash mob; it's a bad experience for all concerned. And the internet can collect niche audiences and really serve them. But Groupon's best niche audience is cheapskates who are super focused on going from great deal to great deal. Carefully managed this might have been a decent small business, but I don't think it could ever have been a large one.

And I think they must have known they were fucked from the start. When they IPOed, 86% of the money raised, over $800m, went into the pockets of insiders.

> Promotional coupons are not exactly a new idea.

The new idea was using the Internet to build a gigantic new audience for those coupons. Once you have that audience, you then become more attractive to businesses that want to advertise to it. In other words, Groupon was just a 21st century version of the age old "pennysaver" (https://en.wikipedia.org/wiki/Pennysaver) publications you can pick up in places like coffee shops, or that you get periodically in the mail (ugh).

An electronic pennysaver could possibly have worked, if they'd grown organically and kept the operation lean. But instead they went the other way, figuring if they got big enough fast enough they could then use the size of their audience to muscle the advertisers who wanted to reach that audience into swallowing hugely disadvantageous terms in exchange for access. (See http://www.slate.com/articles/technology/technology/2012/08/...) for details on that.)

It worked for a while, when their rapid growth made them look like an unstoppable juggernaut that any small business was going to have to learn to live with. But then the growth stopped and smart advertisers fled as they realized that the terms made dealing with Groupon more trouble than it was worth, which meant the one choice Groupon had left to justify its valuation was to get into bed with scuzzy advertisers looking to rip off that big audience. But then the audience eventually realized it was getting ripped off, and boom, death spiral.

Honestly, I'm glad to hear this. It means that the older values: Your consideration and treatment of the customer determine your success. Trying to run a business into the ground "for profit" is a dumb thing to do.

https://www.ribbonfarm.com/2013/04/03/the-locust-economy/

> He added one little factoid I did not know: offering a Groupon deal is by now so strongly associated with a desperate, dying restaurant that professional food critics tend to write off any restaurant that offers one without even trying it.

Sounds like Sauce's Trip Hosley made the right call hanging up the phone when Groupon's Andrew "Andy" Johnston called:

http://sfist.com/2013/08/19/groupon_salesman_threatens_resta...

>Groupon Salesman Threatens Restaurateur Because He Hung Up On Him, Gets Canned

>Groupon Area Sales Manager Andrew Johnston got on the horn to Sauce restaurant last Friday, and spoke with partner Trip Hosley, a co-owner of Sauce's two locations. As the Inside Scoop reports, Hosley was busy at the time of the call and had had enough negative experiences with Groupon to not want to waste another minute on the phone with a salesperson.

>Johnston, though, took things in a pretty unprofessional direction, however, when he shot off an email to Hosley right after the call threatening to bring down the wrath of bad Yelp reviews on him in response to his rude hangup. To wit:

>Hi Trip!

>I sincerely appreciate you hanging up on me. As a resident of San Francisco for over 25 years, I have a huge network of friends (ages 25-40) that all are extremely active on Yelp as well as other social media. I will gladly let them know how you treated me as well as my feelings about the people who run Sauce.

>Go Giants!

>Andy

https://www.facebook.com/SauceSF/posts/unbelievable-customer...

>Andy,

>You must be new to cold calling, you might want to develop a thicker skin, or work for a less despised company.

>Despite what you might think, you have NO right to my time. I told you that I was not interested and asked you twice to remove me from you call list, as I have EVERY time I have been called by a representative from Groupon since our last, horrific, experience with your company. I do not have to give you any more chances, you do not have the right to interrupt me, take time away from my already busy day or to force me to listen to how new and wonderful Groupon is, I am not interested. You would be saving yourself time and energy by removing me from your call list, and focusing on business with whom your company has not already burned bridges.

>We had a relationship with Groupon, Groupon messed it up, we no longer want to have a relationship with Groupon, end of story. After two or three years it would seem like you could respect my wishes as a business owner not to deal with your company and leave me alone.

>All the best,

>Trip

I wonder if Andrew "Andy" Johnston and his huge network of friends (ages 25-40) were an inspiration for that 2015 "You're Not Yelping " South Park episode, and if they have a good time eating boogers and cum:

https://www.youtube.com/watch?v=pDlR_ccnZww

Historic discussion with archive links, showing how "Andy" actually carried through with his threats, and had a history of writing many fake reviews a day for quite some time (which apparently got him promoted to "area sales manager"):

https://news.ycombinator.com/item?id=6229410

https://twitter.com/kenjennings/status/339170784406810624

Sounds like something someone who can afford to spend $300 on a meal would say.

If you’re making food for people who spend $300 for a meal, why would you suddenly offer discounts.

someone replied with an actual study, "The Groupon Effect on Yelp Ratings: A Root Cause Analysis"

https://arxiv.org/abs/1202.2369

Andrew Mason is still worth hundreds of millions of dollars. Sure, he was fired from his job, but I wouldn't exactly call that a "fall". It's not like they took away his equity in the company.

You’re so right!

I think we tend to equate failure with not living up to our expectations, no matter how unrealistic they were. Andrew is probably comparing his actual outcome with the potential outcome that was envisioned when Groupon was flying high. He’s not in the three comma club like he expected, or like his (former) peers are. Hence, “failure”.

You could argue that anyone reading this right now on a computer is probably anthropologically successful enough that “failure” is never a fair term to apply to them.

Narp, I mean sure he didn't get to keep his tenure as CEO, but he was barely in his 30's when Groupon changed hands to stock brokers, who'd rather have a more experienced - read: stock price level manager - CEO at the helm.

I wouldn't trust myself running a big company!

Very true. He's apparently worth $200million. That's generational wealth 99% of us can only dream of.

I'd add more 9's to that number.

999999%

In fact, he was able to cash out before he was fired. How often does that happen?

https://www.forbes.com/sites/joanlappin/2013/03/05/dont-cry-...

The entire Groupon story is a black stain on Chicago startup history.

> How often does that happen?

For execs? I'd assume frequently.

Well, sure. I guess I meant it in more of a "able to cash out pre-IPO while still raising money" context.

I'm not sure that I would call it a black stain on the Chicago Startup history. But I would say that it is one of the weirder startups in Chicago. There needs to be quality journalism on what's been going on. This is definitely something that could be a Ryan Holiday or Michael Lewis level book.

You've clearly missed the point of the story and kind of reaffirmed the pitfalls of being the CEO of a company with any amount of public success.

First, it was a fail if felt your primary responsibility is to the team, shareholders and just general commitment you often set out to as a founder fulfill in building something that people love and use.

Being fired from something you believe you tried your hardest at doing right is brutally painful to self-identity. The quality of the food you eat after word at best distracts you from some of the pain and nagging "what-ifs."

Agreed... it's interesting that Steve Case also thought it was a good time to give an interview as well (on the lessons of AOL/TW), but they don't discuss the billions in restated "earnings".

https://amp.businessinsider.com/steve-case-lesson-aol-time-w...

https://www.nytimes.com/2006/08/18/business/media/aol-adds-a...?

I really recommend the "Without Fail" podcast [1], where this is taken from. Alex Blumberg is an interesting guy with a rare perspective (a journalist and radio host turned venture funded entrepreneur), and these are part interviews part conversations. Really liked the first few episodes.

[1] https://www.gimletmedia.com/without-fail

If you like without fail I'd also recommend internet history podcast http://www.internethistorypodcast.com/

This article is written by Alex Blumberg and has embedded links to that podcast.

I actual wonder how that works, did gimlet pay for this placement in nymag?

Every groupon I've bought I haven't used as a result of me missing some small detail in the "fine print". For example, one groupon was only able to be used on Thursday's. I tried to go with my wife on a Saturday only to be told it would cost $50.

I know I should have read the fine print, but it's so easy to miss.

Ex-Groupon, before and after IPO. Groupon would make a great case study. The fundamental problem was that everyone knew "deal" websites would be a good business, that it would be very winner-take-all because of customer attention and supply, but no one knew how big that industry would be. So lots of companies got into it, but no one knew ahead of time how much it was worth spending to win the fight.

Q:"Just remaining a gigantic private company seemed impossible?" A:"You have to go public at some point. The way we were structured and the way we had raised money, we were just engineered so that, if we weren’t going to get acquired, that was the only exit option for us."

Why? Is this because investors want to make a quick buck on this?

The way funds are structured mean that money out is expected within a ten to twenty year window. Staying private and paying dividends is more of a hundred year window outcome.

The reason funds are structured this way is that it gets complicated to pay out things like bonuses or to do estate planning when so much capital is uncertainly tied up in a single, illiquid entity. Divorce happens, tax rates change, people reasonably want their money.

I'm surprised there is no mention of the Rocket Internet investment. From what I heard it was the non-US part of Groupon (which was what Groupon acquired from Rocket) that partly dragged the company down.

Groupon, today, is a two billion dollar public company. That is no small achievement.

Why did he get fired? At that time the company was attracting lot of customers and doing fairly well. I like this guy. He is so funny. The lay off letter was hilarious.

The article explains it, he had a few issues with board members and after bad performance on Q3 numbers, he was told make it happen Q4. They had some sort of tax liability in France that hit them $10 million and because of it didn't hit Q4 numbers. That was that.

Is there functionally anything bad about getting fired vs resigning? In this situation or any?

I know that in some jobs if you resign they don't have to pay out to the end of your contract. If they fire you they do (unless you're in breach on contract I suppose).

Also if you resign it can be more difficult to get social welfare benefits.

I'd say PR, having to manage how the story goes around.

Basically your reputation, if you get fired it looks bad for you.

Ironically, Andrew Mason insisted on being fired rather than resigning for reasons he did not agree with. So he chose being fired in order to preserve his reputation. (part 2 of the Gimlet "Without Fail" podcast - very excellent coverage)

It was also explained well in the article.

Getting fired by Trump is quite an honor, and it helps with tell-all book sales.

Fired has legal implications. They will do it, but if they don't get all the paperwork right you can sue for wrongful termination. Thus they would rather not fire you if they can get you to resign.

If they are going to fire you and offer your the chance resign. While it means you resigned and thus you can't sue, it also means that when (if...) someone checks references they will say "yes, he/she worked here, and left of his own will". Since any big company will not say more than that no matter who good you are this is a perfect reference and you start over. If you are fired they have to say instead "yes, he/she worked here and until fired"

Note that fired is very different from being laid off.

What's the difference between fired and laid off? Fired is for bad performance/professional errors and laid off is because of downsizing, right?

Yes. In many countries being laid off is called being made redundant, which is more descriptive. Redundancy means they are axing your role rather than yourself.

Thank you. I'm not a native speaker, so I'm usually mixing close enough expression/words.

This is one case were I would expect even native speakers to not fully know the difference.

If you get fired you might not qualify for unemployment benefits, depending on jurisdiction. Not applicable to executives I suspect, but there it is.

It's really the other way around, at least in my state. If you quit or voluntarily leave, then you aren't eligible for unemployment. If you are laid off then you are eligible for unemployment. Whether you can collected unemployment for being "fired" depends on the circumstances of termination. Again, this might vary locally.

I think this is important to clarify because this could affect the people here, not because it affects the subject of the article.

In this state, it's very hard to keep even employees who just stop showing up from drawing unemployment, if they go through the process of signing up for it. There are state employees whose job it is to bludgeon employers into acquiescing on this issue. If the employee got fired and wasn't arrested for crimes committed at the workplace, there's no way she's not getting unemployment.

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