

Groupon Posts Disappointing 1Q Results, loses $43M - theli0nheart
http://on.wsj.com/yhoJKd

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muhfuhkuh
Hmm, an aggregator of business-crippling 50+% off coupons directed squarely at
one-time-use, entitled penny-pinchers is not doing well after they've run
through most of the gullible small businesses in the US?

Go figure.

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tankenmate
Another article[1] on WSJ has as its title "Groupon posts surprise loss" and I
thought, how is it a surprise? Personally I was expecting a loss, when I read
through their S-1 both before and after the amendments the numbers still
didn't add up. If I could find a reasonable source of Groupon stock to borrow
for 12 months I'd be tempted to short.

[1]
[http://online.wsj.com/article/SB1000142405297020436940457721...](http://online.wsj.com/article/SB10001424052970204369404577211442641126010.html)

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retube
You could just take a spread bet position instead. Doesn't require collateral,
doesn't have a cost of funding/carry and, at least in the UK, gains are tax
free.

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corin_
Spread betting does have a big risk attached in that your losses, if you're
wrong, can go way high.

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retube
Yes it's a leveraged product but that doesn't mean you need to take any more
risk. You can put on the equivalent risk of any physical trade. Tne only
difference is you're not putting down the money upfront. And of course you can
put on stop-loss limit to close the trade if your losses exceed your
threshold.

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SoftwareMaven
Whether this is good or bad is impossible to know without knowing the net
value of a customer. If they added a million customers who each had a $100 net
value, this was a fantastic quarter.

My sense, though, is that the net value of a Groupon customer is very low and
may, in fact, be negative. Customers are expensive to get and don't seem to
bring a lot of repeat business without incurring re-acquisition costs.

I would imagine Groupon has an idea what that value is, and if it was high,
they'd be trumpeting it to ward of the negatives of the loss.

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robryan
Seems that fantasy math works well for raising money but not so much for
keeping the share price up.

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jasonabelli
I just don’t think it is a feasible long term business model. It cost to much
to employ tons of sales people to push themselves on small businesses, that
don’t realize that taking a loss to drum up new business is not a good idea
when all Grouponers want is to move on to the next deal. Therefore, they
seldom get repeat deals with vendors (and who would after offering %75 off
after discount and commission) and have to constantly look for a new (sucker)
small business to work with. Not to mention they employ more writers than the
New York Times, to come up with their cute little blurbs. That has to add up
quick. They employ over 6000 people and growing quickly.

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jpdoctor
> _I just don’t think it is a feasible long term business model._

Given the results, it seems that it's not even a feasible short-term business
model.

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realschool
Something about Groupon hasn't felt right since the beginning.

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tomelders
What a shock. If anyone loses money on this, consider it a tax on stupidity.

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dia80
Groupon is in a dramatic race against financial gravity. The insiders will be
desperately struggling to keep the share price up until May when the lock up
period ends and they can flee the burning theatre. To do that they need to
produce one more quarter of results that can keep the fantasy of a company
that will one day justify a $15 billion valuation alive.

The earnings miss (3 cent loss vs 2 cent profit est) shows they are already
struggling to control things and might not manage it. The VCs that paid the
founders to get a piece of IPO flipping action could well be sweating by now.

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paulhauggis
I don't feel sorry for these guys at all. Ever hear the mixergy interview with
the guy from Groupon? He talks about pissing money away on things just because
they could.

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jgw
Seems like a timely opportunity to watch "Startup.com" again. I'd highly
recommend it to anyone who has not seen it before - it is an up-close
documentary of a "dot-com 1.0" hopeful, from the night the CEO-to-be walks out
of his job at Goldman-Sachs to... well, just watch it. :)

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paulhauggis
I saw it. Very good documentary.

"E-dreams" is another fantastic documentary about Kozmo.com.

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ry0ohki
They paid a 1600% effective tax rate, which is just happening this quarter,
and supposedly explains most of the loss.

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rplnt
Just out of curiosity, is it normal for companies with continual loss to go
public?

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Gustomaximus
Not normally for companies of this size. Most companies want to show they can
make profits to maximize their float value. But if you look at the pink sheet
stocks many of these are companies looking to fund their RD or growth and have
negative earnings. Also many pink sheet stocks are thinly veiled scams.

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InclinedPlane
I still don't understand how a company that apparently takes half the total
revenue from all purchases from people who use a groupon could possibly lose
money. I'm sure I'm missing out on something, but it seems like they should be
drowning in money.

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joering1
I will join you from the other angle. Hat off to Mr. Mason for a genius idea,
but in the wildest dream I wouldnt come up with a business where you ask a
store to cut their price 50% and share 50% of the remaining 50% with me just
for announcing your deal. when this just came in public light, to me it felt
like an insult: I thought no way a store will lose money on each merchandise
sold because there are not in charity business and to me it was simply an
insult that before that deal they tried to rip me off with jacking up the
price 150% (since they would still make money after the discount and 50% to
Groupon).

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corin_
Whether the 50% lines work for people is on a case by case basis, and you're
certainly not alone in thinking there are some serious problems with it.

However, if you think of it another way, Groupon is marketing. Sure, using
Groupon costs them money, but so does typical marketing, whether it's a clever
PR campaign, or a TV advert, or a spot in the local newspaper... The real
question is always going to be whether the results Groupon delivers you are
worth the cost of the campaign, and how that compares to alternative forms of
marketing.

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pitdesi
The results are disappointing to analysts, but surprisingly good to me. I read
this as "Groupon cuts marketing expense by 25%, manages to triple revenue
(YOY) this quarter." They are in MUCH better shape than LivingSocial (lost
$558mil on revenues of $245mil in 2011
[http://www.washingtonpost.com/business/economy/livingsocial-...](http://www.washingtonpost.com/business/economy/livingsocial-
lost-558-million-
in-2011/2012/02/01/gIQAjId3hQ_story.html?tid=sm_twitter_washingtonpost))

Groupon had $507 million in revenues this QUARTER, and lost $43 million. My
guess is that if they wanted to lower expenses with their current model, they
could cut the writing staff pretty significantly. From talking to friends
there, at the moment the writers write 5 deals per day... They could easily do
some huffpo style shit and cut that staff in half. They also are planning to
get in deeper with their merchants... remains to be seen how it goes, but will
be interesting.

(edited to add YOY - thanks for the correction vladd)

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vladd
> manages to triple revenue this quarter

Quarter revenue was tripled on a year-to-year basis (2011 Q4 versus 2010 Q4).

> if they wanted to lower expenses they could cut the writing staff pretty
> significantly

Based on the earnings call, staff expenses are actually about to increase as
GRPN will start to hire more tech on its payroll (Silicon Valley software
engineers).

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bennesvig
The writing was a draw at first, but now I never read the copy. Just scan
whatever deals they have that day.

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shareme
What is interesting to watch is that there are many market opportunities for
these types of businesses where the costs to obtain customer and hand hold in
the beginning is very high..

My personal example is a private business/equity exchange platform is just one
example(I worked on one in Chicago).

So how does technology empower a start-up to change the costs of customer
acquisition and change that customer cost of acquisition equation.

I do not think they solved the customer cost of acquisition yet..

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forgottenpaswrd
I always considered Groupon's creator a scam artist, just look at the History
of his companies.

He is specialist in telling people what they want to hear, a la Madoff or
Obama. He is really great at this.

Fool people take the bait, smart people that identifies the trick seek to also
profit from the fools(speculative investment banks are not as fools as they
look from outside, they know what they are making, creating bubbles that will
explode onto other's people hands), and continue dancing around the music of
the magic spell.

When the spell is over, people get bankrupted and the smart people(that sold
their stocks long ago to the deluded) look surprised.

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corin_
Actually, fool people think they can win people over to their argument by
bringing frankly moronic party politics into it - in particular when the line
insulting Obama could be used for almost any politician.

