
Let's stop laughing at Groupon - jasondc
http://fortune.com/2015/01/26/lets-stop-laughing-at-groupon/
======
JonFish85
To be fair, Groupon did a lot of things _right_.

* They grew insanely fast for several years in a row.

* They had crazy usage numbers.

* They convinced VCs they would go public at a huge valuation.

* They got a huge buyout offer from Google.

* They IPOed, giving the company a $12B valuation and bringing in billions in cash while giving investors high multiples of their investment.

All of those things are tremendous successes, not worth laughing at. Now from
an outside perspective, they're not a traditionally successful company.
They're currently worth about 1/4 of their day 2 stock price. They're trying
to find a better business model (Groupon Goods?), because their daily deals
wasn't cutting it. The company was, in my opinion, a pump-and-dump type of
company: not built for the long haul, but for raising the next round of cash.

Laughing at Groupon? I'd be more jealous: they were able to complete a sprint,
but so far in the marathon, they're not looking like a company built to last.
They look like a company that is using the IPO cash to search for something to
sustain themselves, while cutting costs to extend their runway. To say that's
"successful" is a bit of a stretch, in my mind. Their success was in hitting
all the right metric for a large IPO. Since then, it's been a bit of a dud.

~~~
tinkerrr
Funny how every single 'right' thing they did benefits the early owners only
and no one who buys the company stock thereafter. Successful companies are
seldom built on the principle of maximizing value for yourself while handing
lemons down to the next person foolish enough to invest in your company.

~~~
JonFish85
I completely agree; I think a lot of startups these days are built on the same
principles. Uber comes to mind, specifically. I think the name of the game
there is to get to an exit before the regulators really start to get involved,
because those will only eat away cash/value. The same applies to AirBnB
(again, only in my opinion). So in general, these types of startups are really
just sprinting to an exit, growing insanely fast to benefit the early people:
founders and investors. Once it's public, they've cashed in their stock, so
it's up to the new guard to figure out how to turn the growth company into a
successful, long-term company.

~~~
fennecfoxen
> I think the name of the game there is to get to an exit before the
> regulators really start to get involved, because those will only eat away
> cash/value.

Ostensibly, the multi-decade vision for Uber is that it becomes not just a
taxi substitute but the operator of all the transportation in the future, as
people abandon cars in the US and as motorized transportation reaches more of
the third world, eventually culminating with them having a good chunk of the
ownership in the driverless-car market... and that's where the value will come
from, not just the disruption of the entrenched taxi interests (which is only
_adequately_ lucrative, and, as you mentioned, riskier). And regulatory
diversity at least ensures that there will be somewhere that they should be
capable of proving out a model with which to tempt the rest of the world.

Realistic or not, I tend to think that the management buys into that kool-aid.

~~~
charlesdm
Uber I can see working in the long run. For taxis, they are disrupting
artificial monopolies that have been created by cities.

Airbnb, that one is a bit murkier. There is something to be said for people
wanting better value for money, and being able to rent a nice apt for the
price of a small hotel room surely is a good thing. Even if you would add some
sort of hotel tax to that, I'd say it's still superior value to a traditional
hotel.

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arfliw
What a fluff job. There was one interesting sentence in the whole article:

>Its revenue and EBITDA have consistently climbed in each year since going
public, and there is plenty of cash on hand without a single cent of debt.

What about their business? I don't even know what they do today, still daily
deals? How is that going, how are the growth prospects? Did they pivot, will
they need to?

Asking the writer more than HN. That was crappy 'journalism'.

~~~
debacle
Their EBITDA is their business.

~~~
sk5t
That's slightly less than constructive... the parent post well notes that the
article should offer some insight into Groupon's actual earnings-producing
operations, strategy, and future outlook on same.

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tsm
Disclaimer: Groupon engineer (but not speaking for company).

Groupon's a lot more than daily deals now—that (what we call "Local") is still
a big part of the business, but there is also Goods, Getaways, our
POS/inventory management system, and Snap! by Groupon (in addition to several
other things I'm probably forgetting). And even in Local the emphasis has
shifted from daily emails ("push") to various "pull" strategies.

It's always tough when you fire your founder and CEO, but the company's been
recovering steadily and I have faith in upper management's ability to continue
increasing revenue and diversifying the product offering.

~~~
brador
> daily emails ("push") to various "pull" strategies.

I guess push is notifying the user, but what's pull?

~~~
alasdair_
Have a lot of content and "pull" users to the site to experience it.

Part of that is having Yelp-style merchant pages with reviews on them, part is
having a lot more editorial and blogger content and part is building in search
so you can find, say, "things to do in San Francisco" or whatever more easily.

------
api
I'm not laughing. I'm just perpetually a tad depressed that stuff like this is
apparently more valuable than defeating aging, fixing our economy in
fundamental ways, or making life mulitplanetary. Hell, it's usually more more
valuable and profitable than even minor and mid tier innovations in the IT
sector.

~~~
gibybo
>stuff like this is apparently more valuable than defeating aging, fixing our
economy in fundamental ways, or making life mulitplanetary.

It's not. Groupon is worth $5 billion. Any of those things would be worth
trillions.

~~~
api
"Any of those things would be worth trillions."

So where's the investment capital for them then? They're all chronically
underfunded.

The difference, I think, is risk. Any one of those would be worth trillions
_if it worked_ , but the risk of any approach failing is very high.

~~~
ianferrel
The other difference is capturing the surplus. Fixing the economy would be
worth trillions, but how do you get your piece of it? It's much easier to
capture the surplus if you can insert yourself into the payment process for an
already existing product.

~~~
api
That's why IMHO only governments can do those kinds of things right now. Only
governments can make high-risk-high-payoff extremely broad and long-duration
investments and then capture the upside through overall economy-wide growth
(via taxation and other means). Nobody else can both afford the risk and
capture some of the upside.

It's possible that in the future someone will invent financial vehicles to
make it possible to make those kinds of investments in the private sector, but
it hasn't happened yet.

Edit: in a sense there is already _something_ , namely government bonds, ETFs,
and long-term positions in currency markets. But those are _too_ coarse-
grained. What we need is some way for private investors to make private
investments in things that are all of: high risk, high payoff, and _broad
payoff_.

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justboxing
Andrew Mason is having the last laugh, all the way to the Bank. Last time I
checked, despite being fired from the Company he created out of a Wordpress
Blog, his nett worth was $200 MILLION.

Source: [http://www.cnbc.com/id/100512677](http://www.cnbc.com/id/100512677)

~~~
staunch
Most people who create something worth $5 billion end up with a lot more than
$200M. He earned it.

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danteembermage
Groupon has lots of debt, just not the long-term kind. Why is having debt due
sooner somehow better? For reference check out this [http://www.sec.gov/cgi-
bin/viewer?action=view&cik=1490281&ac...](http://www.sec.gov/cgi-
bin/viewer?action=view&cik=1490281&accession_number=0001490281-14-000064&xbrl_type=v#)
their current assets and current liabilities are about the same, with cash and
what they owe their merchants about the same too.

That said, I always teach Groupon as the quintessential example of the power
of having a negative payables cycle. They don't deserve any laughter for the
growth engine they created; whether the business itself is sustainable is
still an open question, but I'd say the same thing about GM so that comment
doesn't really count as derision.

~~~
cperciva
_I always teach Groupon as the quintessential example of the power of having a
negative payables cycle._

I thought Amazon was the example everybody always used.

~~~
dudurocha
I think Amazon is quite the opposite, no? I'm really curious...

Groupon receives the money then pays the owners in 30 days. Amazon does not
have to pay its suppliers before and sell and receives money after?

~~~
cperciva
When Amazon launched, the standard contracts between publishers and bookstores
had the stores paying 60 days after books were shipped to them. This made
sense for conventional bookstores which would often have books on their
shelves for months before selling them; but Amazon typically turned over their
inventory every 30 days, meaning that -- even after the inevitable delay
between charging a credit card and getting the money -- they received payment
for books on average 2-3 weeks before they had to pay their suppliers. A lot
of Amazon's early growth was funded by this negative working capital
requirement.

Now that Amazon has expanded from books into CDs and DVDs and electronics and
clothing and toys and food and computing services, of course, it's quite
possible that their cash flow picture is very different.

------
silencio
Groupon has been growing some non-deals services in the past few years, I
wonder if that's what's finally paying off?

My restaurant uses their POS+payments platform moderately successfully (for
certain values of success, the POS world is awful). It's a side of Groupon
that most people don't know exists, that I think makes sense.

~~~
wallyhs
Our restaurant also uses Groupon's POS and payments system. "Moderately
successful" is how I would put it, although version 2 has improved things
considerably. There is pressure to find a better POS, but I have yet to see
one that I like. Most other point-of-sale systems that I've seen either fall
short on everyday things like splitting checks, or they're technologically
terrifying. The last demo I saw was of a cloud-based system with online
reservations, and it looked alright up until I realized that the terminal was
running Windows XP. This was last fall.

------
Touche
I still remember the height of the Groupon hype and a HN commenter saying that
they could be bigger than Google.

~~~
antimora
Till Groupon is entirely out of business, you cannot say for sure. Such open
end claims should more specific to refute.

~~~
bdamm
Sure we can.

Groupon is Cyber Pennysaver, at best. They can execute well, but it's very
competitive. The business is high touch.

Google helps to render or find almost every page on the Internet, thereby
shaping reality for a huge number of people. Mind control is a lucrative
business.

Ergo, Groupon is a bit player compared to Google, and they always will be as
long as the meaning of the businesses stay where they're at.

------
voronoff
Groupon itself was the one pushing poor metrics for valuation and hiring a
bunch of salespeople they never intended to keep more than a year past IPO.
They artificially pumped their price, and should be derided for that even if
they made money doing so.

~~~
LanceH
It's a good thing IPO's are professionally underwritten and that the only
people with access to IPO shares are the sophisticated investors who surely
saw through all of this.

~~~
lmm
It's a _public_ offering; the _defining characteristic_ of an IPO is that it
means that the shares are available to be bought by widows, orphans, and
general idiots, rather than just accredited investors.

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tehabe
I think it is weird that Forbes calls Groupon a "social buying site", even
though that just sell coupons online.

~~~
wnissen
That's what it was originally. The idea was that the coupon would only be sold
if you got a certain number of people together. So it's sort of like these
buying clubs that group a bunch of individuals together and buy from the low
bidder. Once Groupon got big there were so many takers for each deal that the
buying club aspect fell by the wayside.

~~~
tehabe
I remember a Dutch company which tried that, if a certain number of people
would buy the would be slightly cheaper. But they couldn't really attract a
lot of customers despite a huge budget across Europe. So it failed.

~~~
chkuendig
That was LetsBuyIt.com, see
[http://news.bbc.co.uk/2/hi/business/1122354.stm](http://news.bbc.co.uk/2/hi/business/1122354.stm)

------
josefresco
The Jury is still out. Groupon is still actively pushing growth strategies
which can backfire in big ways.

[http://www.fool.com/investing/general/2014/10/06/why-
groupon...](http://www.fool.com/investing/general/2014/10/06/why-groupon-
stock-has-crashed-43-in-2014.aspx)

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mathattack
As long as they find a way to stay a public company, they're a success in my
book.

------
marjuk
One thing I don't understand that how is firing founding CEO serves to be
keeping the company growing and finding new revenue sources? isn't just a
terrifying signal to the market that the board has lost faith in the long-term
viability of the company by making such big decisions as firing a founder CEO?

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dennisbest
Fine. But I reserve to laugh at Fortune. This line in the article stands out:
"If you want to criticize someone for overvaluing Groupon, take a good long
look at public market investors."

Aren't they doing THAT in this article?

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Dylan16807
This is ridiculous. Groupon hired the people that set that valuation. It's
completely reasonable to mock Groupon for it.

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tw04
Failing to take Google's offer is proof they did over value themselves, so his
analogy quickly falls on it's face.

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shittyanalogy
23 billion down to 4.9 billion...

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blt
That page of text with ads took about 10 seconds to load and render on a
50-megabit internet connection with a 3.4 ghz i7 CPU and 16 gb memory. Let's
start laughing at Fortune's web development team instead.

~~~
azinman2
Was about 2 seconds on my iPhone and my home cable internet.

~~~
acchow
Try again after clearing cookies and cache. Really slow.

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Eleutheria
Groupon is like Blackberry.

They're already dead but nobody has told them.

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vernie
Never.

