Groupon Shares Tumble to Record Low
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The thing that seems to be holding them back is that they're simply not executing at a super high level yet.
It seems like they scaled the business by doing everything the same way but at higher volumes. They need to move to a self-serve model so they can get rid of the overhead of having 10,000 sales/writer employees. They need to simplify their product down to the primary use case. They have at least four products currently: Featured Deal, Now!, Goods, and Rewards.
Unfortunately I do predict doom and gloom for them. It would be so hard for them to make the changes required that it's most likely they will not be able to do it. Andrew Mason isn't in the kind of position Zuckerberg is in from a control perspective, which means he'd probably get fired for trying to do this stuff.
Part of the flow is not really automate-able: it involves hearing from the owner the products they have and writing a pitch on Groupon.com that fits the overall theme and style of the site. But it can still be done faster probably if owners were to leave that info with clever phone bots rather then being hand-hold while walked though every stage of the process.
I think the daily deal thing, which started Groupon, is not nearly as interesting as this. They could drop it entirely.
I believe business owners could absolutely handle it themselves, if you made it really simple. The primary interface could be a smart phone, so it would work for any business. Made it dead simple. It shouldn't take more than 5 minutes to put up your daily ad.
Acts of faith do not justify overvalued companies. Groupon is not worth more than $1bn.
It's the same reason why Yelp has to spend so much on direct sales to get these businesses advertising.
But there are more systemic issues with Gropoun, merchant, and employee relationships. Again, the DNA of a grouponer - being that of a deal thrift - often leads to a strained relationship between employees and grouponers. No use in fostering good rapport with the customer; you'll never see 'em again. Tips will be small (again, deal thrift), upselling is improbable, etc., all leading to employees often becoming resentful toward grouponers. All this leads to a large net negative to the small business owner.
Groupon is a well disguised parasite.
http://www.msnbc.msn.com/id/45398235/ns/world_news-europe/#....
http://www.riverfronttimes.com/2011-10-13/news/groupon-fail-...
http://crosscut.com/2012/04/11/business/22198/Groupon-When-w...
> Again, the DNA of a grouponer - being that of a deal thrift - often leads to a strained relationship between employees and grouponers.
This is insulting and frankly, just bullshit. The overwhelming majority of the businesses on Groupon are failing. Of course I'm not going to be back. They won't be there!
Out of the businesses that aren't failing, you can put them in these categories: new location for an established business, new business, experiences (like tours, hot air balloons, etc.), confused business.
I have experience with all of these.
1. New location. There was a restaurant that I like that opened a new location. They had a groupon. I already knew they had great service and excellent food. I went on a groupon, had the experience I expected. Did I return to that location? No, I prefer the other one because it's closer. But now I know about it and if I'm in that neighborhood, I know I can go to that location and have the same excellent experience I expect.
2. New business. These mostly suck. Because they're new and don't know what they're doing. Out of all the ones I went to (and I went to many), I would only go back to one. It was a chain, so they had fewer variables to juggle.
3. Experiences. These are flip of the coin. Some are excellent, some suck, but regardless ... once I had an experience, I'm not going to have it again. That's boring. They know that. Most of the groupons for these are structured so that they make their money on the first round.
4. Confused business. There's only been one like this. A fantastic restaurant. I bought 2 groupons and went there twice. I have no idea why they did it. The place was packed, service great, food amazing. It was voted Groupon of the year in my area (NYC) and they had it again ... so I bought 2 more and went there 2 more times. Will definitely come back many, many times.
Groupon is going down the toilet. That's because there are fewer and fewer of the above businesses on it. Now it's 99% failing businesses. Unless I already know the business or I'm traveling, I'm not going to touch Groupon. That's after almost 50 groupons purchased.
> The overwhelming majority of the businesses on Groupon are failing.
This may or may not be true. Even if true, I fault the failing business owner for being a bad business owner. But I still largely fault Groupon for preying on those who have a history of bad decision making. "Oh, this guy isn't business savvy?! twists mustache Let's sell 'em on Groupon!"
To use your own words: "This is insulting and frankly, just bullshit." I would love for you to find a non-anecdotal study which shows that most (>50%) of businesses on Groupon are failing.
"Now it's 99% failing businesses." Ahh...now I know you're just being hyperbolic.
My use and excitement for Groupon is almost on the same trajectory as their stock and frankly, I don't think I'm alone.
I do fully believe that Groupon (and Living Social) will survive -- albeit as much more modestly sized companies -- but the sea of imitators should evaporate except for a very select few in well-entrenched niches. And that's fine, they serve their purpose, and they do have a legitimate market in which they can make money and deliver value. The rest of us can treat their product as an established commodity and move on.
The very nature of the IPO itself should have raised red flags to everyone (just as Facebook's did). Early investors are all dumping shares, founders are dumping shares - in lieu of insider trading laws, it's the surest sign that something is amiss. You really think if the company was expecting the same massive growth that the only people with the insider knowledge of that happening would be selling shares? You think John Rockefeller was selling shares of Standard Oil?
Is it me, or has the standard of proof on HN dropped to immeasurable levels?
What's that? Hmm?
Oh no, I didn't say anything, not me. Just doing my part in the two minutes hate against anyone who isn't an engineer. We all know engineers are the unappreciated man-gods oppressed by the investor class.
Boo investors! Hiss!
Your criticism is like accusing somebody calling out unscrupulous used car dealers who sell lemons of hating people who own cars.
We're talking about leadership that took 90% of a nearly $950 million investment round right off the table into their pockets.
If you don't know the subject matter, GTFO.
Likewise, when a person makes statements about the mental states of another, such as what those people did or did not know, that is a statement of fact. If you assert those facts, then you should have evidence to demonstrate that such things are true.
Unfortunately, all you have are poorly formed, emotionally charged opinions informed by a couple of articles you read on TechCrunch. Or maybe the WSJ if you're a little more rigorous. What you don't have are sufficient facts to warrant the conclusions you're defending, unless -- and this is my point -- you have such a low standard for truth that practically any statement can be considered substantiated, so long as it agrees with your prejudices about who deserves wealth and what constitutes success.
Do you actually have anything to say, or are you compelled to react whenever you see someone not rabidly and mindlessly denouncing Groupon?
Did he make or though he would make more from IPO than from Google's $6B offer? Don't think so.
If Mason would be "all about the money", like you imply, he would have sold this "ponzi scheme" to Google in a heartbeat.
Over the years, following his story, it looks to me like he truly believes/d in his idea and that there is a business model/revenue model in it.
At the time, I remember reading that almost the entirety of the investment went to buy out early investors.
So it looks like Mason got the best of both worlds: he got the cash out a substantial number of shares and then hang on for the IPO upside.
You also forget to mention that the Google deal was contingent upon due diligence, which now, in hindsight, may not have even successfully gone through.
So still you haven't convinced me that Mason was after the money. I think he obsessively believed in the idea, which to me (personally) has no merits from business perspective, therefore from the investor/stockholder perspective this is a nightmarish position to be in, but one has to agree Mason did build something good: he gave jobs to thousands unemployed and stimulated the recessed economy by providing platform for both businesses and customers to continue selling and buying.
edit: I don't believe Mason had a crystal ball to predict how future will look.
Of course, reasonable people can disagree on this, but I think the questionable accounting standards (see: adjusted consolidated segment operating income) that they made up to hide their huge weaknesses before the IPO came straight from the top.
I think Mason knew the wheels were coming off even before the Google offer, and he decided to take the guaranteed 1 billion instead of risking not making it through due diligence with Google. Then, push the accelerator to the floor, try to obfuscate the numbers as much as possible, and get away with as much money as possible before the IPO investors were left holding the bag.
But the sad thing is that all investors invested with their eyes open to it. You can't call it a Ponzi scheme because everyone knew of Groupons profit challenges BEFORE the IPO.
This is just IPO greed / tech bubble meets reality, if anything. Groupon was never worth what the people who bought the shares thought it was. Speculation is not illegal though. If the shares doubled/tripled post IPO, they would have all made off like bandits, so I feel no sympathy for them.
Admittedly, nobody should be surprised by the downward trajectory, IMHO.
All pop. No star.
It popped.
It never produced a star.
All flash, no fire. Sizzle but no steak.
A failure to deliver.
I mean, the value of the entire company has gone down when measured by the stock price, but the stock price is just a report of the latest trade.
If you and I trade 1 Share of Groupon for $1, we didn't just wipe billions of dollars in capital away.
Maybe I lost money selling you that 1 share, but Groupon still has the cash in the bank from it's IPO, all other investors still own the same percentage of the company, revenue remains the same, profits remain the same --- so the stock transfer between you and I didn't really change anything fundamental about the company did it?
Of course, if you don't want to sell, you could just ignore the stock price, and pretend the stock doesn't have a price even. Although even then that assumes you're not using the "paper value" of the stock in any way. For example, if you want to use the stock as payment for something (e.g. in a stock+cash transaction), or as collateral for another transaction, then its paper value matters.
As for the merits of not taking the deal, I think we should be clear – the early investors and many early employees have done alright and most likely won't be losing their shirt like any of the recent investors:
http://allthingsd.com/20110602/where-did-groupons-billion-do...
Also, fwiw, this post seems to be fairly well thought out and it is clearly from before the IPO, so it's worth looking back on with fresh eyes: http://shortlogic.com/post/6142108636/groupon-ipo-pass-on-th...
This was the kind of thing that thoughtful business analysts were noticing in the weeks before the Groupon IPO: the company didn't have a sensible earnings model, even if it had "revenue" that dug it deeper and deeper into a hole.