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From the article:

'Don’t expect profits anytime soon: Groupon hasn’t turned a net profit in any of its first three years of operations, including a net loss of $389.6 million in 2010. The company said it expects its “operating expenses will increase substantially in the foreseeable future ...“'

Sounds very 1990s dot-com bubble to me ...




No, it actually sounds like their business model is so profitable in a single locale that they've been rapidly spending outside funding to accelerate their growth and stay ahead of the competition.


I'm sorry; but that's a completely ridiculous conclusion to draw from reading that they have been losing tremendous amounts of money.

Staying ahead of competition means nothing if you don't have a strong plan to become a profitable business.


Why is that ridiculous? It's ridiculous to say that Groupon doesn't have a "strong" plan to become a profitable business. Of course they do.

The market they are in is becoming intensely crowded, and since they are the current market leader, they need to spend a lot of money (yes, even if it results in losses) to stay in that position. If they stay can cement that position whilst their competition falls at the wayside, then they will become extremely profitable as the market leader.


It's ridiculous to draw a conclusion in this form (as rottencupcakes did):

"Local-oriented company is losing money globally, therefore, they must be hugely profitable in at least one locale"

There's absolutely no evidence to support that claim (at least, none that has been presented in this discussion).

You've actually taken ridiculous one step beyond with your assertion that, "they will become extremely profitable as the market leader." Market leadership has absolutely nothing to do with profitability. The two concepts are 100% unrelated.

What is their plan to become profitable? If they can grow revenue by thousands of percentage points and still not achieve profitability--how do they do it? They've got great plans around achieving revenue growth--but I contend that have no idea how to go from revenue growth to profitability.


You really don't think Groupon has a plan, however flawed, to go from large revenues to large profits?


Based on the way they've operated their business to this point, I have no reason to believe they have such a plan.

There are things we know, such that Groupon is known to negotiate very aggressively with local businesses to get the best possible deals. We also know that there's strong competition to Groupon negotiating with the same (or at least a similar set of) businesses. That fact alone suggests to me that Groupon will not be able to negotiate as strongly as they currently do--therefore their COGS will go up.

We also can see a trend where as their revenue has grown, their expense growth has actually outpaced their revenue growth. While that means they haven't found efficiencies that no doubt exist in their business, the fact that their expense growth is outpacing their revenue growth suggests that they aren't even LOOKING for those efficiencies.

Finally, there's the evidence that (like many tech companies before it) that investment up to this point in Groupon has basically operated as a ponzi scheme--taking new investments and paying that capital out to earlier investors. Sadly, that's a really dangerous indication of their real reasons for doing an IPO--raise capital so the last of the early investors can cash out.

I'm not saying a business like Groupon can't succeed and can't have a legitimate IPO--but I see no evidence that Groupon is really that business.


The barrier to entry for Groupon competitors is low and there is no cost for both consumers and local businesses to switch to competitors. Based only on that I don't see much hope for them long term.


> No, it actually sounds like their business model is so profitable in a single locale

Chicago is by far their fortress of revenue. Check out the by-city Groupon sales stats for a day in December 2009.

Image: http://static.businessinsider.com/image/4b301d5300000000001d...

http://www.businessinsider.com/groupon-office-tour-2009-12#t...


Voting you up, up, up. Zipcar turns great profits in various locales, but they do not turn profit as a whole because they're investing heavily in their fleet.

s/fleet/'sales team' and s/Zipcar/Groupon and you should see why Groupon isn't profitable yet.




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