5 ms·

Does Groupon count the 50% that is owed to the vendors in their revenue? If so, it doesn't feel all that impressive. I'd be more curious to see how much profit

Does Groupon count the 50% that is owed to the vendors in their revenue? If so, it doesn't feel all that impressive. I'd be more curious to see how much profit was made.

alanfalcon 16y ago
Yes, that is considered Revenue.
- allantyoung 16y ago
  No, it shouldn't count as revenue. The money owed to merchants is considered a liability and is probably treated as Accounts Payable.
  - piguy314 16y ago
    Revenue is income before expenses, you are probably thinking of net income.
  - ahalam 16y ago
    Agreed. It shouldn't be counted as revenue. It is such misleading reporting that leads to over valuation and bubbles.
  - michael_dorfman 16y ago
    Of course it is revenue. Think about retail for a moment. The amount of money a retailer takes in is revenue. The fact that he needs to pay a wholesaler for the items sold doesn't change that fact. If the money is being paid to Groupon, it's revenue.
    - _delirium 16y ago
      In transactional / middle-men businesses, it's more standard to only report your percent take as "revenue", rather than including pass-through dollars (e.g. PayPal only reports their fees as revenue, not all dollars that flow through PayPal). But I suppose it's unclear if Groupon is that kind of business; arguably they could be more like a retailer, where it is standard to include all dollars flowing through as revenue.
- hncommenter13 16y ago
  I disagree. I believe Groupon should call this $760M number gross revenue, with recognizable net revenue being somewhat lower. (I'm not an accountant, but I've had some exposure to these issues.) One of the key questions in proper revenue recognition is determining whether the company is, in essence, a principal or an agent. eBay, for example, reports net revenue, which is a percentage of its gross merchandise sales, as it only collects transaction fees for arranging exchanges between a buyer and seller. Groupon keeps a fraction of the total dollars customers send them, with the balance being distributed to the merchant when the customer redeems the coupon. A good discussion of the accounting standard is here: http://www.revenuerecognition.com/content/experts/9002.asp http://www.revenuerecognition.com/content/experts/9002.asp In the rather long article linked above, it mentions three indicators that can point to net revenue treatment as the most appropriate, each of which I think applies to Groupon: a) "The supplier is the primary obligor in the arrangement." In other words, the local merchant is ultimately responsible for delivering the product/service to the customer, not Groupon. b) "The amount the company earns per transaction is fixed (in dollars or as a percentage of the arrangement fee)." If I spend $100 on a "$25 off $50 deal," Groupon still makes its stated fee/percentage of the purchase price of the Groupon. They don't make anything on the incremental dollars I spent at a restaurant over and above the Groupon amount, for example. c) "The supplier has credit risk." This may not be directly applicable, but the gist of this indicator is whether it is the merchant or Groupon who is ultimately at risk to collect from the customer for the product/service. My guess is this risk lies with the merchant. (Imagine I use a Groupon for part of the cost of a meal; if I can't pay the balance, it's the restaurant that bears the loss, not Groupon.) These issues are always a judgment call (accounting is rarely as black and white as one assumes it to be). But to my mind, these factors indicate Groupon should likely call the $760M revenue figure gross, not net.
apinstein 16y ago
Groupon is essentially a fancy retailer that "drop ships" everything. In accounting terms it's done this way: $760M Gross Revenue -$360M COGS (cost of goods sold) ----- $400M Gross Profit -300M (Itemized expenses) ----- $100M Operating Income -$10M Tax/Depreciation/etc ----- $90M Net Income Figures besides revenue are just guesses of course, but this is how it's done in accounting terms. For a real example see something like Amazon: http://finance.yahoo.com/q/is?s=AMZN+Income+Statement&annual http://finance.yahoo.com/q/is?s=AMZN+Income+Statement&an...

Does Groupon count the 50% that is owed to the vendors in their revenue? If so, it doesn't feel all that impressive. I'd be more curious to see how much profit was made.

alanfalcon 16y ago

Yes, that is considered Revenue.

allantyoung 16y ago
No, it shouldn't count as revenue. The money owed to merchants is considered a liability and is probably treated as Accounts Payable.
- piguy314 16y ago
  Revenue is income before expenses, you are probably thinking of net income.
- ahalam 16y ago
  Agreed. It shouldn't be counted as revenue. It is such misleading reporting that leads to over valuation and bubbles.
- michael_dorfman 16y ago
  Of course it is revenue. Think about retail for a moment. The amount of money a retailer takes in is revenue. The fact that he needs to pay a wholesaler for the items sold doesn't change that fact. If the money is being paid to Groupon, it's revenue.
  - _delirium 16y ago
    In transactional / middle-men businesses, it's more standard to only report your percent take as "revenue", rather than including pass-through dollars (e.g. PayPal only reports their fees as revenue, not all dollars that flow through PayPal). But I suppose it's unclear if Groupon is that kind of business; arguably they could be more like a retailer, where it is standard to include all dollars flowing through as revenue.
hncommenter13 16y ago
I disagree. I believe Groupon should call this $760M number gross revenue, with recognizable net revenue being somewhat lower. (I'm not an accountant, but I've had some exposure to these issues.) One of the key questions in proper revenue recognition is determining whether the company is, in essence, a principal or an agent. eBay, for example, reports net revenue, which is a percentage of its gross merchandise sales, as it only collects transaction fees for arranging exchanges between a buyer and seller. Groupon keeps a fraction of the total dollars customers send them, with the balance being distributed to the merchant when the customer redeems the coupon. A good discussion of the accounting standard is here: http://www.revenuerecognition.com/content/experts/9002.asp http://www.revenuerecognition.com/content/experts/9002.asp In the rather long article linked above, it mentions three indicators that can point to net revenue treatment as the most appropriate, each of which I think applies to Groupon: a) "The supplier is the primary obligor in the arrangement." In other words, the local merchant is ultimately responsible for delivering the product/service to the customer, not Groupon. b) "The amount the company earns per transaction is fixed (in dollars or as a percentage of the arrangement fee)." If I spend $100 on a "$25 off $50 deal," Groupon still makes its stated fee/percentage of the purchase price of the Groupon. They don't make anything on the incremental dollars I spent at a restaurant over and above the Groupon amount, for example. c) "The supplier has credit risk." This may not be directly applicable, but the gist of this indicator is whether it is the merchant or Groupon who is ultimately at risk to collect from the customer for the product/service. My guess is this risk lies with the merchant. (Imagine I use a Groupon for part of the cost of a meal; if I can't pay the balance, it's the restaurant that bears the loss, not Groupon.) These issues are always a judgment call (accounting is rarely as black and white as one assumes it to be). But to my mind, these factors indicate Groupon should likely call the $760M revenue figure gross, not net.

apinstein 16y ago

Groupon is essentially a fancy retailer that "drop ships" everything. In accounting terms it's done this way: $760M Gross Revenue -$360M COGS (cost of goods sold) ----- $400M Gross Profit -300M (Itemized expenses) ----- $100M Operating Income -$10M Tax/Depreciation/etc ----- $90M Net Income Figures besides revenue are just guesses of course, but this is how it's done in accounting terms. For a real example see something like Amazon: http://finance.yahoo.com/q/is?s=AMZN+Income+Statement&annual http://finance.yahoo.com/q/is?s=AMZN+Income+Statement&an...