2 ms·
Update 2: We’ve also learned that Google will pay out 80% of a business’ revenue share three days after its deal runs. Google will hold the remaining 20% for 60
by trotsky 16y ago
Update 2: We’ve also learned that Google will pay out 80% of a business’ revenue share three days after its deal runs. Google will hold the remaining 20% for 60 days to cover refunds before sending the rest.
This is a pretty significant piece of the news. With groupon famous for its slow payment terms, 3 day terms may look very attractive. Cash flow management is a big portion of running many small/local businesses and with most of their vendor terms from 7-30 days the 30+ day delivery from groupon can turn a big success into a big problem. This sounds like a great sales differentiator for them.
Even if google doesn't get significant traction out of the gate, if this forces groupon to abandon their aggressive floats it could have a real effect on how good their financials look leading up to an IPO.
Imagine if Google was willing to take a significantly lower revenue share on the deals to gain market share. A big reason everyone is so breathless about the business model is how crazy the margins are. If google was willing to throw a significant amount of the $6B offer price at a promotional pricing structure they could seriously slow down the rate that the competition expanded markets.
- hop 16y agoIf the businesses were worried about cash flow, I think the 75% haircut would be the bigger issue. Also, they will likely be pre-paid for a large percentage of their Groupon patrons (I have many I haven't used from months ago) and not everyone ends up using their coupon. Businesses flock to Groupon because its popular and puts them in the spotlight for a day to tens or hundreds of thousands of local people on their mailing list and twitter followers.
- petervandijck 16y agoMmm, I think you misunderstand cashflow. It's not how much money you make, it's how fast you get it.
- petervandijck 16y agoLet's say they spend not 6 but 1 billion dollars to make this work, over the next 3 years. That means they can spend 1000000000/365/3 = 1 million dollars a day on providing awesome deals, for 3 years. Don't tell me that won't work.