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Today’s Stockholders’ Letter

groupon.com

36 pointsspathak17 comments

To go against the tide in these comments, this is actually exactly what they should be doing. They've properly identified the problem (finally), and do have enormous resources in attacking it. As long as the daily deal product can hold its own and not bleed money, they're well-suited to build the 'operating system for local,' an analogy I've been waiting for. They could do some interesting work in B2B products, vertically targeted/non-discounted/package offering, and generally use their existing resource base to get people offline together in new and creative ways.

Definitely agree: they have everything in place for this. Having a personal relationship with that many small business owners around the country is huge and there's so much low-hanging fruit in the "MIS for small biz" space. There's a lot of startups that are making headway here (Square, etc) but they don't nearly have the resources (the biggest being the massive sales org) that Groupon does. As soon as Grpn ships a new product along these lines, they can call hundreds of thousands of potential customers that already know the sales rep on the phone and are possibly already paying a competitor for a sub-par product.

If I were Andrew Mason, I'd be looking to acquire a small-biz focused product company at this point to accelerate the process and start shipping asap.

(Yes, I'm aware I'm totally armchair CEO-ing here.)

Not to mention trying to partner with dating sites and the like to offer offline inventory to their users - new revenue stream for both parties, and solves the problem of awkwardly have to choose where you're going and figure out who's paying...

>"They could do some interesting work in B2B products, vertically targeted/non-discounted/package offering, and generally use their existing resource base to get people offline together in new and creative ways."

That's still a very labour/sales intensive process. Can this business model work without droves of underpaid call centre workers?

It's a good question, but I'm not sure it has to. They're almost breaking even right now with that cost, and their only consumer product is a crappy deals e-mail site. With better consumer offerings, they could be getting 2-3x the value off of that cost.

> We improved our GAAP EPS during the year from a loss of $0.48 per share in the first quarter of 2011 to a loss of $0.12 per share in the fourth quarter of 2011.

Groupon is still accelerating towards demise. It's just now accelerating slightly slower than it was before.

I'm not sure that word "accelerating" means what you think it means.

It's either a Red Dwarf or H2G2 gag, can't remember. "We're slowing down?" "Sort of. We were accelerating so quickly that we're now just accelerating slightly slower than we were before."

My point is that Groupon is the sound of a bunch of people inflating a financial bubble. All this post-IPO bullshit about growth is intended to make it seem like they took a few hits early to get them done with, but once the dust has settled they'll be in a great position. They aggressively scaled a patchy business model and are now trying to fix it.

Sounds like red dwarf. Good show. Sadly dry wit doesn't come across well on HN. Sorry.

Also, this one > We improved our operating margin from negative 134% to negative 14% for the full year.

Isn't this stuff supposed to be worked out before you IPO?

You're not supposed to try and cheat the SEC. It's long seemed that Groupon raced to IPO so that some people got their money before it fell apart.

Not necessarily. Companies with high enough growth rates just need a line of sight to break-even to be able to go public. Now, whether you should invest in such companies is another topic entirely.

Does -134% operating margin count as a "line-of-sight to break-even?"

Gotta love the "throw mud at the wall and hope some of it sticks" business model.

At least they threw enough mud before the IPO to cover up the writing on the wall.

I really hope they succeed, simply because there are a ton of developers employed by them in Chicago. If they go under it's going to be bad news for the local developer ecosystem.

Yelp seems to have "local" sewn up for restaurants. Angie's List is a strong competitor in other categories. The road is not exactly clear for Groupon to take over local.

So it's a $1.14bn pivot.

Awesome.

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