
Groupon Sales Team Files Class-Action Suit - hunterowens
http://paidcontent.org/article/419-more-bad-news-for-groupon-sales-team-files-class-action-suit/
======
byrneseyeview
_suddenly unpopular with both users and investors..._

The first rule of bad journalism is to confuse the first and second
derivatives. Groupon is enormously popular with users and investors--it's just
not the most popular it's ever been. Yipit's fairly recent data indicate that
while the daily deal market contracted slightly over the summer, but Groupon
shrank more slowly than LivingSocial (
[http://techcrunch.com/2011/08/25/yipits-daily-deal-report-
gr...](http://techcrunch.com/2011/08/25/yipits-daily-deal-report-groupon-up-
livingsocial-down-travel-deals-take-off/) ).

In "Fooled by Randomness," Taleb points out that the more frequently you
measure results, the more random they are. Second-by-second, Warren Buffett is
losing money just about half the time.

Groupon obviously has problems, and LivingSocial is executing amazingly well,
but it should be laughable to call them "unpopular" rather than "less
massively popular than at their peak a couple months ago," in the same way
that you wouldn't call someone "poor" because they moved down a spot in the
_Forbes 400_.

~~~
jonnathanson
I think the word "unpopular," in the context of the article, is referring to
people's perceptions of the company's business practices and brand. Not so
much to the size or engagement of the userbase. I might be wrong, but that was
my interpretation.

(It's "unpopular" right now because it's come under a lot of heat in the
press; perhaps "embattled" would be a more accurate word).

~~~
hammerdr
And neither would be accurate. Most users, both businesses and customers, are
wildly happy with group on.

~~~
nopinsight
Citations, please.

Without knowledge about their churn rates, especially in comparison with their
competitors, it is not obvious either way. There are also users who still
receive the daily emails because they did not bother to cancel the
subscription, but rarely look at them.

------
ChuckMcM
This had to be sort of expected. Groupon has grown fast and they turned down
the acquisition offer from Google. This suggests that they were messaging new
employees "We're taking this one all the way to IPO." And then proceed to ply
new employees with stock and spreadsheets showing great returns. Many people
at a 'startup' understand that they are sacrificing a bit of pay or benefits
now, for a potentially much larger upside later. And Groupon certainly fit the
mold.

Now Groupon pulls back on their IPO plans, folks who had been "taking one for
the company" feel cheated because they have a harder time imagining huge
returns than they did before. (On a related note I've had this issue with
calling options and stock 'compensation' in the past because really until
someone buys your paper it really isn't something you can spend) So the sales
folks turn around and say well if we're not going to get that money we
foolishly believed would be dripping out of the IPO spigot, they're going to
ask for it in cash.

I really wonder if they would have crossed this threshold (suing) if the 'big
cheeses' in the company hadn't decided to do a huge funding round to pay
themselves off. (another way to convert 'potential' in earnings into cash).

------
gyardley
Completely misleading title - it should read 'Groupon Salesperson Files Class-
Action Suit'. You only need one person to file a lawsuit, class-action or
otherwise, and there's no indication in any of the docs that any other members
of Groupon's sales team are involved.

From the filing (in Justia - [http://docs.justia.com/cases/federal/district-
courts/illinoi...](http://docs.justia.com/cases/federal/district-
courts/illinois/ilndce/1:2011cv05685/259040/1/)) it looks to my completely-
not-an-expert-eyes like Groupon's mistake here was not treating its salaried
employees like salaried employees - on rare occasions it gave them overtime
pay, and on the attached pay stub hours and an hourly rate ($15.62) are
clearly recorded. Whoops.

~~~
tptacek
If that's true, it's a pretty common error. Most tech companies operate under
the (usually valid) assumption that their employees are all salaried and
exempt from OT comp. But it's usually to the benefit of all those employees to
be classified "hourly", and theres a bunch of innocuous things employers can
do to make that happen.

More common than breaking people's status with overtime payments: threatening
to dock pay for coming in late or missing days.

~~~
tedunangst
California, a few years ago, cracked down on this. Entry level programmers are
not exempt. I think because they lack responsibility or skill or somesuch. I
found this out only when I had to start filling out time sheets. I became
exempt again after a raise, apparently there's some salary floor at which
point they assume you have to have responsibility because you're paid too much
not to.

FWIW, CA appears to exempt outside sales but not inside sales, so probably all
groupon salespeople in CA have a case.

~~~
tptacek
This is shocking to me. Are you sure? Being non-exempt is a big deal. And it
cuts both ways: it also means your employer can dock you when you show up
late. Are you sure about this? Are junior devs literally punching timecards?

~~~
ak217
I think this is it:

[http://www.management-advantage.com/products/overtime-
exempt...](http://www.management-advantage.com/products/overtime-exempt.html)

 _1\. "Minimum Salary Test" The minimum salary level for exempt white collar
employees according to A.B. 60 is "no less than two times the state minimum
wage for full time employment." "White collar" exemptions refer to the
executive, administrative, learned professional, creative professional,
computer employee, and outside sales exemptions specified in the Fair Labor
Standards Act (FLSA) as amended effective 8/23/2004. Computing the California
minimum salary level for January 2009 we do the following: Current minimum
wage = $8.00 per hour X 2,080 hours in a year = $16,640, multiplied by 2 times
the minimum wage = $33,280_

~~~
tedunangst
You must already be exempt for that test to apply. It doesn't mean anyone
making $16/hr becomes exempt.

------
hop
A side note - I have been supremely impressed with Groupon's customer service.
Emails personally returned within minutes and no problem refunding groupons I
no longer wanted.

~~~
gojomo
My experience has been the opposite. Despite the fact that this blog post from
Mason...

[http://www.groupon.com/blog/cities/groupon-organizes-
class-a...](http://www.groupon.com/blog/cities/groupon-organizes-class-action-
against-itself/)

...suggests that Groupon's "completely open return policy" can be used, rather
than a lawsuit, to get a refund on an expired Groupon, that's not true. They
won't give such refunds, and their customer service responses have advised
that the Groupon in question may still be usable "if state law applies". So
rather than providing "unbelievable" customer service, or even following
through on the refund promises of their CEO, they're doing the absolute
minimum required by law.

So in the single interaction where I could independently test whether what
Mason touts is true, it was not. As a result, I don't put much weight in
anything Groupon claims.

~~~
hop
Well they just refunded my 4 helicopter ride Groupons for a total of $596 that
would have expired next week. If I let a Groupon expire though, I wouldn't
bitch about not getting a refund, no matter the state law.

~~~
gojomo
And I would have requested the refund just before expiration... if I'd known
the Groupon Promise and the Mason blog post were misleading. (Actually, I
probably wouldn't have bought the Groupon in the first place. I bought it
right _after_ being impressed with the Mason claim, and thinking, "what a
smart policy, it takes all will-I-use-it-or-not anxiety out of buying a
Groupon".)

But I trusted them, and was burned. Miniscule amount of money, but now I know
that they strategically deceive about the refund policy, so I won't be
trusting them again.

I'm OK if a particular business wants to grind out their margins from fine
print, 'breakage', and other gotchas. I'm all for _caveat emptor_. They could
change the "Groupon Promise" to read "If your Groupon experience ever lets you
down, let us know and we’ll refund your purchase. Period. Except for
expirations." And Mason could fix his blog post so that it doesn't portray the
'completely open return policy' as the preferred remedy for people with
expired Groupons.

I just hate the act that they've got Nordstrom/Bed-Bath-
Beyond/Costco/Zappos/etc-style customer service, when they don't. Together
with the other reports of dodgy advertising claims, encouraging businesses to
raise their prices pre-Groupon to inflate discount percentages, and pushy
sales practices, it gives me the impression that they've ranked 'honesty' far
below 'growth at all costs'.

~~~
namityadav
Have you tried redeeming the groupon for the money you paid at the merchant?
From Groupon's FAQ:

What happens if my Groupon's promotional value expires?

All is not lost! If your Groupon's promotional value expires, you can always
redeem it for the amount paid. For more information about expiration dates and
voucher values, read our Terms of Sale

------
aresant
Interesting tidbit from the article that I did not know:

"a federal judge in San Francisco permitted a tour operator to proceed with a
merchant class action lawsuit over alleged false advertising"

leads to

[http://www.reuters.com/article/2011/08/24/us-groupon-
lawsuit...](http://www.reuters.com/article/2011/08/24/us-groupon-lawsuit-
idUSTRE77N6NY20110824)

------
auston
To summarize the situation (someone please correct me if I am wrong?):

1\. Files for IPO

2\. ASCOI (Adjusted Segmented Consolidated Operating Income) falls under
scrutiny from public & SEC

3\. VP of Global Communications resigns

4\. Internal Memo "leaked" to major press outlets

5\. SEC investigates said memo

6\. Sales Team files Class-Action suit

Wow.

~~~
blantonl
7\. Cancels IPO

8\. Insolvent in 6 months

9\. Layoffs

10\. Lawsuits

------
dkokelley
I never really understood Groupon's super high valuation. I think they grew
too fast, and possibly needed to cut corners to sustain their growth. Can
anyone explain what the appeal has been for investors?

~~~
jonnathanson
_"Can anyone explain what the appeal has been for investors?"_

The usual shtick about how growth trumps all other considerations. "It's the
fastest growing company ever!" "Who cares if COGS is absurdly high / users
aren't buying / revenues have been overstated / etc? Fundamentals don't apply
when they're growing this quickly!" "This is a winner-take-all market, like
with Amazon in the 90s!"

I remember reading endless defenses of Groupon's business model on
SeekingAlpha in the months leading up to the IPO filing. People would trot out
all sorts of highly sophisticated models and theories to demonstrate how
Groupon was pretty much exempt from the laws of thermodynamics. I'm too young
to remember if the same pitch was used for the Dotcoms of the '90s bubble, but
the logic sounds eerily familiar.

~~~
larrys
"This is a winner-take-all market, like with Amazon in the 90s!"

Amazon is often pointed to as a company that was doubted much and then
succeeded. What isn't talked about as much, in addition to the fact that there
were many more companies that went bust than hit, is the fact that Amazon lost
3 billion before it became profitable. (Source: financials on Amazon investor
site). The fact is Amazon should have failed and the critics were right more
than they were wrong.

"I'm too young to remember if the same pitch was used for the Dotcoms of the
'90s bubble"

Same idea. Making people think they are stupid if they don't "get it". I know
otherwise smart people who lost $100,000 on dot com stocks that they had no
business in back then.

~~~
rudasn
> Amazon lost 3 billion before it became profitable

Where exactly did they find 3 billion to lose? How did Jeff Bezos manage to
convince investors to give up so much cash? I'm really surprised about this

~~~
larrys
Taking only 1 year as an example, 2001 Amazon had $444 million of accounts
payable, $305 million of current liabilities (some other things...) and 2.1
billion of long term debt.

So, in 2001 the total current liabilities and ltd was over 3 billion dollars.

So they borrowed - they issued bonds as well as used other types financing.
The interest payments for that year are actually pretty low in relation to the
debt, interest expense for 2001 was only about 139 million.

------
mdoerneman
I see Groupon's rise and fall as similar to MySpace. _traffic for rival deal
site Living Social rose 27%_ Maybe Living Social is the Facebook in this
comparison.

~~~
enjo
In my world it definitely is. They are MUCH more local for those of us living
in the city (Denver in this case) than Groupon which typically has deals that
are 20 miles from my house.

For me and my social circle, Living Social is something we consistently use.
Most people I know have actually unsubscribed from Groupons mailing list.

Anecdotal for sure, but I think there might be at least a kernel of trend in
there somewhere:)

~~~
r00fus
This brings up an interesting point. Perhaps hyper-locality (ie, zipcode or
even neighborhood granualar offers) is the full-paradigm shift that will
revolutionize this Groupon concept.

Social sizzle like what LivingSocial adds I think is nice, but forgettable (no
one I know has gotten/used the "free deal" group buy).

------
divvlr
I would recommend to groupon instead of forcing businesses to give deals. Set
up a system that has the users bid to spend a certain amount for a good or
service. Once you have enough people agreeing to it, there's no way a business
would turn it down. You could cut the work force in half and let the users
have control of where they get deals. That's my 2 cents.

------
jtap
This is really sad. In my limited understanding of business, I always thought
that Groupon's greatest asset was it's sales team. Who else has a sales team
that can hit so many small businesses across the us so fast. I was hoping that
they would leverage this asset in more ways than just selling advertisement.

------
johnbatch
They should have taken that google offer.

~~~
sek
I wonder if they couldn't, what if Google took the offer back after they saw
their financials.

~~~
felipemnoa
I'd wager it was something in that neighborhood. Either google withdrew the
offer or groupon knew that google would not go ahead with the offer after
seeing their financials and hence decided to decline it. The offer however
made them seem really hot though. Hey, if google wants them why shouldn't we
regular folks?

------
candre717
Poor business fundamentals create poor business outcomes. Groupon needs to
reevaluate itself, and if it must, downsize and regrow with a better product.
Basically, Groupon needs to figure this out - or everyone else will - and it
won't be good for Groupon.

------
adnam
The turning point for Groupon was that awful, offensive Superbowl
advertisment.

------
VladRussian
a boom needs a webvan

------
suking
Almost starting to feel bad for Groupon - what else could possibly go wrong?
The only thing that seems left is insolvency.

~~~
ams6110
There has GOT to be a great case study there once all the dust/ashes settle.

~~~
suking
"How To Almost Go Public By Making 50 cents for every $1 spent." - HBS Case
(2012)

~~~
ams6110
... or "When Google offers you $6B, take it."

Pigs get fat. Hogs get slaughtered.

~~~
migpwr
They were pigs, not hogs. The original investors walked away with a majority
of the final round of funding. I don't think Google's $6bn offer would have
allowed them to do that. The people left holding this junk are now trying to
pawn it off on the public...

------
lhnn
My spidey senses are tingling that this is some sort of sabotage... too many
things are falling apart too quickly.

~~~
lhnn
So much for " (-1, Disagree)"

------
Koldark
Shit meet fan.

