
Andrew Mason out at Groupon - lleims
http://investor.groupon.com/releasedetail.cfm?ReleaseID=744280
======
danilocampos
This guy.

Travel back in time with me to October, 2010. Stanford. Startup School.

Andrew Mason has been talking, sharing the origin story of Groupon, the
lessons learned about entrepreneurship, the pitfalls, the joys. He is fun and
engaging. You wanna like him, you wanna see Groupon succeed.

We get to the part of the talk where questions are asked and answered. He
answers some early softballs. Then one brave soul stood up with a real query
that only Mason could answer.

Is Groupon a sustainable business, given what we'd been hearing from merchants
online?

It was as if a mask had dropped. Where once there was cheer and energy, there
was now a sullenness. The man seemed _affronted_ at the notion that his
business would be challenged in this way. Despite the fact the opportunity to
ask just such a question was one of the great values of a venue of this sort.
Despite the fact that Groupon's sustainability had been the elephant in the
room the whole time. This was right after some of the first stories from
distressed Groupon merchants had been trickling out.

Petulant, absent all of his previous ebullience, Mason asserted the business
was sustainable, offered no supporting details, and demanded the next
question.

A good leader has the intellectual honesty to recognize their missteps and
explain them, along with the remedies explored. The expectation for that is
even more acute when you've been elevated to the role of mentor.

It was in that moment, his phoniness laid bare, that I decided Groupon was
likely melting puppies in its basement, Mason knew it, and didn't know how to
reverse the operation.

~~~
mgkimsal
Name me one CEO or founder that would go to "startup school", stand before a
bunch of people, and answer that question with anything but "yes".

I'm taking it you're basing your opinions on the _way_ he answered the
question, not the answer itself, right?

~~~
danilocampos
100% correct.

The way I'd have answered it to match the tone of _every other thing he'd
said_ goes a little something like this:

"You know, it's a fair question. Obviously, I believe the answer is yes.

We're still learning a lot about how to scale this business and educate new
partners. We could have done a better job in some cases, and I think that's
what you're seeing when people are frustrated by us online.

We're working with our merchants to understand what they need to make sure
everyone – both our customers and our merchants – gets a great deal."

~~~
largesse
So the problem isn't that you thought he was a hypocrite, it's that he didn't
lie well enough to hide it. Isn't that hypocritical?

~~~
danilocampos
I didn't have a problem at all – Groupon did. And the dramatic fashion with
which his mask dropped was the tipoff, that's all.

------
edw519

      +----------------------------------+
      |    TODAY'S GROUPON DAILY DEAL    |
      |                                  |
      |  1 Hour of Outsource Counseling  |
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      |       $25.00   | BUY NOW |       |
      |                +---------+       |
      |                                  |
      |    50%        137      2 days    | 
      |  savings   purchased  remaining  |
      +----------------------------------+

~~~
edanm
I know you never really left HN, but it's really good to have you back edw519.

------
joetek
Full memo from Andrew Mason (his jottit.com link isn't working):

People of Groupon,

After four and a half intense and wonderful years as CEO of Groupon, I’ve
decided that I’d like to spend more time with my family. Just kidding - I was
fired today. If you’re wondering why… you haven’t been paying attention. From
controversial metrics in our S1 to our material weakness to two quarters of
missing our own expectations and a stock price that’s hovering around one
quarter of our listing price, the events of the last year and a half speak for
themselves. As CEO, I am accountable.

You are doing amazing things at Groupon, and you deserve the outside world to
give you a second chance. I’m getting in the way of that. A fresh CEO earns
you that chance. The board is aligned behind the strategy we’ve shared over
the last few months, and I’ve never seen you working together more effectively
as a global company - it’s time to give Groupon a relief valve from the public
noise.

For those who are concerned about me, please don’t be - I love Groupon, and
I’m terribly proud of what we’ve created. I’m OK with having failed at this
part of the journey. If Groupon was Battletoads, it would be like I made it
all the way to the Terra Tubes without dying on my first ever play through. I
am so lucky to have had the opportunity to take the company this far with all
of you. I’ll now take some time to decompress (FYI I’m looking for a good fat
camp to lose my Groupon 40, if anyone has a suggestion), and then maybe I’ll
figure out how to channel this experience into something productive.

If there’s one piece of wisdom that this simple pilgrim would like to impart
upon you: have the courage to start with the customer. My biggest regrets are
the moments that I let a lack of data override my intuition on what’s best for
our customers. This leadership change gives you some breathing room to break
bad habits and deliver sustainable customer happiness - don’t waste the
opportunity!

I will miss you terribly.

Love,

Andrew

~~~
jacquesm
That's a hell of a way to go out. He's not my favourite guy but this little
note has more character and more genuine frankness than volumes written by
other CEOs on their departure.

~~~
jacques_chester
I think he's witty and charming too.

But those personality traits do not necessarily make him a good CEO.

In my non-professional opinion, this is what's happening:

<http://en.wikipedia.org/wiki/Attribute_substitution>

------
staunch
From his twitter account:

    
    
      Yesterday:
      "Three oranges in a meeting with four of us?
       No question - I give my oranges to the others.
       #leadership"
    
      15 minutes ago:
      "For Groupon Employees: https://www.jottit.com/v5wux/
      (Apparently, sharing oranges is necessary but
      insufficient #leadership)"
    

I'm sure he's not everyone's cup of tea, but I would totally work with this
guy.

~~~
johndavidback
In hindsight it's easy to say bad things, but rewind a couple of years and
Group was exploding, awesome place to work, and felt strong enough to say no
to an acquisition by Google.

Though I'll bet now the regret at that turndown has to be killing him, and
many others.

~~~
Im_Mr_Manager
From what I've read on HN in the past it was Google that walked away from that
deal during due diligence and not Groupon.

------
chetanahuja
"CEO Andrew Mason Replaced By Eric Lefkofsky and Vice Chairman Ted Leonsis At
Groupon"

Ha, this is somewhat like Dick Chaney letting Bush take the fall for the Iraq
fuck up and then take over in 2008 "to fix things". (before you start hitting
downvotes, read some background about this guy).

1) [http://www.businessinsider.com/groupons-cozy-deals-with-
lefk...](http://www.businessinsider.com/groupons-cozy-deals-with-lefkofskys-
marketing-logistics-and-law-firms-2013-2)

2) <http://mashable.com/2011/06/02/groupon-cash-out/>

"Altogether, $946.8 million, or roughly 86% of the funds raised across the
three investments, was paid out to Groupon directors, officers and
stockholders. Just $151.4 million was retained by the company to use as
working capital and for general corporate purposes."

------
jfb
Those deck chairs would look much nicer over on the port side, no?

------
capkutay
During my commute I pass Groupon's Palo Alto office every evening (I only go
this route during the evening because it's closer to my gym). For such a large
and publicized company, their building always seems empty. I never see people
going in or out. I always see empty conference rooms in the window. Perhaps
this doesn't reveal anything about the company, but the view from outside
(literally) doesn't compare to what I see when I pass other tech companies in
the area.

------
timmm
In 2012 alone Groupon had a net loss of about HALF A BILLION dollars, just
look at their financial statements.

What an atrocity of a web business, just ugly.

------
ChuckMcM
Well at some point the board has to act or risk becoming the target of a
shareholder lawsuit.

~~~
bcoates
Do those ever work? I thought shareholder lawsuits were literally a scam law
firms ran on people emotional about losing money in the market.

~~~
Mvandenbergh
Almost never. The whole "companies have to maximise shareholder value or the
board will get sued" thing isn't really true.

Shareholders get to vote for the board and they have a broad range of
statutory protections that ensure company accounts are audited, compensation
arrangements are disclosed, etc. But as far as a general right to make money?
Nope. You'd only have a chance with that kind of lawsuit if the board made an
obvious, colossal blunder that should have been obvious to anyone at the time.

------
phil
...And Lefkosky asserting control.

Anyone who follows Groupon more closely understand what that's likely to mean
for the changes in direction they had been trying to pull off?

~~~
droopyEyelids
I worked at Groupon for about three years, during which time I witnessed Brad
opening a box of Atlas Shruggeds which he gave out for christmas. I've heard
Eric literally yelling in anger that certain departments within the company
should not have scored so highly on the yearly employee survey that measured
happiness/satisfaction.

Now that I shared those anecdotes, your guess is as good as mine.

------
minimaxir
...and GRPN is up 5% after-hours. Investors really didn't like him, did they?

~~~
imjk
It was already down 25% for the day.

~~~
Silhouette
GRPN appears to have dropped more than 75% over the past couple of years.
Barring some very unusual circumstances, that seems like a compelling argument
for a change in leadership at any business.

------
sethbannon
What's the point of interim co-CEOs? Seems like an odd move.

~~~
yajoe
No insider knowledge, but I've seen co-leads when someone departs for three
reasons:

1) Make it clear to employees, shareholders, and the public that there will be
another change coming. Everyone should know that a company run by co-CEOs is
unlikely to be permanent. This also helps with recruiting since outside
candidates know they have a legitimate shot.

2) Set up explicit competition between the two biggest contenders to win the
slot. I personally believe this is dirty and guarantees the loser to leave
(which I think is net bad -- the loser was a contender for CEO for a reason).

3) Reduce the need to fill someone's shoes. By giving what was one person's
job to two people, those two people can focus on their areas and excel
individually without unfair comparisons to their predecessor. This is
especially important when the predecessor was a public figure. Think Tim Cook
comparisons to Jobs. Microsoft did this with the E&D division when Robbie Bach
left (Phones and Xbox went to different people).

~~~
wilfra
It's not #2 - or at least there is no risk of anybody 'leaving'. These are not
executives, they are the majority shareholders and control the board.

------
joeco
Great opportunity for a company with huge reach to move in a completely
different direction.

------
arbuge
Inevitable in hindsight...

------
andyl
Too bad for Mason. IMHO they should have sold to Google when they had the
chance. There are many folks who applauded the decision to decline the offer.
Build for the long-term, they said. In general I agree with that sentiment.
But when you have a $6B offer on the table, you gotta put the kool-aid aside
and be very objective about the future prospects for your company.

~~~
larrys
"But when you have a $6B offer on the table"

From my many years of experience in business I can say that anytime you have a
serious offer on the table you have to decide if you are willing to risk going
for door number two.

You can always point to cases where people didn't sell out and ended up better
but with business you have to look at the downside not just the upside. Over
the years that is the biggest mistake that I have seen people make in
negotiation.

I'll give you an example with domains. I'm in the process of buying a domain
for a startup and the startup will pay $50,000 maybe even $100,000 for the
domain. But the owner won't even engage preferring to shoot for the stars and
thinks he will get a million. He won't even state a price. At this point we
will cut bait and find another name. I know fully well this business (I also
own names) and I know that this domain has about a 2% chance of selling for
anywhere near that amount in coming years. I have domains that I've held for
15 years and have never gotten a single offer on. I've had domains that I've
held for 15 years that I've sold for big money. Anytime someone comes along
with a serious offer I focus on how long it will take until the next offer
will come in - if ever. Business and gambling are two different things.

~~~
rhizome
It's not clear from your description, have you actually offered the $50-100K?

~~~
larrys
Nope. Offered perhaps 10,000 and getting no engagement and "sorry not
interested in selling" bs. I've dealt with google and that's the only
person/company that's not interested in selling any domains and doesn't need
the money. (Or once a Fortune 500 company). Everybody else (especially this
guy) is interested in selling. I know the "not interested technique" well. And
I know this guy is a gambler and there is no end in sight to this. We don't
have time to waste with someone who won't even state a price and wants to be
chased.

I have found my client another domain that they are happy with.

~~~
philsnow
> "sorry not interested in selling" bs

how is that bs ? I have a vanity domain that I'm not interested in selling.

~~~
larrys
Because when it's said by a company that is in the business of buying and
selling domain names and has sold multiple domain names for big dollars it's
BS. I operate in that industry, this isn't speculation on my part.

Otoh, if I approached Marissa Mayer to buy a domain she owned I _wouldn't_
consider "I don't want to sell" "BS".

If I approached McDonalds and wanted to buy "hamburger.com" from them
(hypothetical) and they said "don't want to sell" I _wouldn't_ consider that
BS.

But this company, that is their business (domains). It is BS.

Lastly, If your vanity domain name is (hypothetically once again)
"nowblog.com" maybe you aren't interested in selling it. If someone offers you
$100,000 you might be interested, correct?

------
wilfra
Biggest lesson here is to go for Zuckerberg style control. Mason gave these
guys control from the very beginning because he 'doesn't care about money' and
didn't want to be greedy. Now look at him - he got fired from his own company
while it's still an infant.

Pincus, Zuck and many others will have as long as they want to turn their
companies around and wont be out unless they decide to quit. They learned from
Steve Jobs.

~~~
Mvandenbergh
Because of the nature of their businesses Zuckerberg and Pincus didn't need
serious amounts of money nearly as early. Of course they took VC money, but
they didn't need it so early, so desperately nor did need so much of it.

~~~
wilfra
As his $700 severance package demonstrates, the guy just didn't care about
money. That's admirable and I think he's awesome for it - but when it comes to
whether or not you can be fired from your own company, it's foolish.

He got outplayed by smarter and savvier businessmen who had been down this
road many times before.

------
clobber
Wow with Eric Lefkofsky as the new CEO they went from bad to worse. Lefkofsky
has always been the one behind the scenes pulling all the strings from early
investment, cashing out his $1 BILLION and to the IPO. Yikes!

------
BostonCFO2
Groupon's accounting gimmickry is extensive, and began pre-IPO (recognizing
full purchase price of coupon when they are only acting as an "agent"
(middleman) not as a "principal" (i.e., making the food, owning the spas for
the massages etc.), which as a CFO I can tell you is Accounting 101.

Among other places: <http://bit.ly/Y3hfft>

And yes Rocky Agrawal and the Grumpy Accountants Professors and PrivCo.

And the accounting tricks continue - even most Wall Street analysts covering
the company for a living have not picked up on it - but for "Groupon Goods
last fall they changed the way they account for those purchases. (Remember for
Goods their "deal-share" is even smaller than their 37% or so for
restaurants/spas/etc. It's under 10% for tablets, laptops etc. So when they at
first sold a $2000 flat screen TV, they booked (as forced by the SEC finally)
just their $200 cut. When revenue growth slowed, they (meaning likely Eric
Lefkofsky instructed) Groupon to find a way to recognize the entire $2,000
sales as their revenue. And the only way (again, speaking as a CFO who knows
this intimately - not boasting my opinion is better than anyone else's, just
sharing the real facts, I don't own or short the stock - and the only way they
could recognize the entire $2,000 example TV sold is if they "took possession
of it, then re-sold it" in plain language. And one of the requirements is that
Groupon has (even briefly) the "risk of loss" (that is, the TV breaks while
legally/technically in their possession before shipped to the buyer). I.e.,
find a way that Groupon's technically not just a deal middleman on Goods and
let the buyer and seller deal with each other, but be the Reseller like
Amazon.

So they literally (and this is not speculation, this is in the SEC filings -
not highlighted and sort of minimally mentioned, but it's there) - they
literally state starting with their third quarter 2012 10Q that beginning that
quarter Groupon signed a new contract retaining a 3rd party company to act on
its behalf to receive the goods from the Goods merchant, then that company
acting on Groupon's behalf - with a contract that says Groupon bears "all risk
of loss" and then ships it to the buyer. Now that sounds awfully inefficient,
and it is, because it has to be shipped twice, reducing Groupon's margins to
near zero on Groupon Goods. But it takes Groupon Goods revenue from 10% of
each sale to 100$ of each sale. Starting to get the picture?

So in the last 2 quarters they reported a dramatic spike in Groupon Goods
revenues (no profits of course) but analysts - not knowing any better - began
to upgrade the stock, saying yes the daily deals business is slowing to almost
0$ year over year, but look at Groupon Goods! Its revenue is suddenly growing
like gangbusters! (I have to give hat tip here to an Accounting Seminar that
used it as an example, and to PrivCo who published a Research Note detailing
it, but I checked everything in the SEC filings and can say with 100$
certainty, but of course you can confirm it yourself.)

So price targets were raised, and many former bullish turned bearish analysis
(like Ken Sena from Evercore) turned bullish again, and said Groupon is going
to surprise all the naysayers! Groupon Goods is its true future, it's growing
in triple digits in revenue now! (Because their revenue recognized went from
10$ of each sale to 100%, by having this fulfillment company acting on their
behalf briefly taking possession of the goods and contract says Groupon has
"all risk of loss" - even though the possession was sometimes for 10 minutes,
since they just put it in a box and shipped it right away to the waiting buyer
who had already pre-ordered it. No inventory, just in and right out the door.

One more fact you should know (again gotta give hat tip to PrivCo securities
lawyers on their staff who pointed this out), go to the section on "Related
Party Transactions" (i.e. this is where a company is doing business or hiring
a company owned by a senior Officer, Director or Major Shareholder). And in
that section - brief as it is - it says one of those Related Party
Transactions is that they retain and have a contract with a fulfillment
company founded in mid-2012 that is owned by Eric Lefkofsky and Brad Keywell
(Groupon's co-founders, Board members and largest shareholders). Yes you read
that right. They saw daily deals declining sharply, and decided they had to
find a way to "grow Revenue" - without actually selling any more stuff. So
they quickly formed this company that signed exactly the contract terms needed
verbatim that would allow the accountants to deem Groupon as having taken
possession and acting as a principal / reseller and not an agent and recognize
the entire Goods amount purchased.

And most Wall Street analysts (Evercore's Ken Sena was on TODAY on BloombergTV
still touting the Groupon Goods revenue growth as reason to buy the stock,
even though daily deals fell for the first time ever year over year.) He's
clueless, and he's telling his clients Buy based on Groupon Goods revenue
growth spurt since last summer.

I'll let the HN crew react to above instead of just saying out loud what I
think of that or what you should. Share what you think of that.

~~~
robk
Exactly this. Seems like a shell game at this point with not much hope in
their near-term future. Goods is a low-rent version of Woot and is going to be
very hard for them to stay competitive in since most goods don't have nearly
the margin they can get off a daily deals machine. And high-margin goods by
nature have other sellers who can afford to spend on marketing out of that
margin, negating Groupon's built-in marketing advantages.

