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I'm surprised by the loss they are running. Think how big their cut is. My understanding is that on a 50% off deal, they get half of the merchant's take! Grante
by iqster 15y ago
I'm surprised by the loss they are running. Think how big their cut is. My understanding is that on a 50% off deal, they get half of the merchant's take! Granted their effective cut is lower since they provide some costly/valuable services .. e.g. they pay you right away while redemptions might happen over months. But still ...
I wonder if merchants aren't just curious about the groupon model as opposed to groupon having "cracked the local nut". I guess we'll know in 2-3 years. If their revenue flattens or goes down vs if it keeps going up up and up.
On a side note, I hope this makes Facebook file for their IPO already. For some reason, I feel the Facebook IPO will be a turning point of sorts in the current tech boom. Not sure why though.
- jonknee 15y ago> Granted their effective cut is lower since they provide some costly/valuable services .. e.g. they pay you right away while redemptions might happen over months. But still ... How is that at all costly? Groupon receives money up front--say $20 for a $40 coupon and then pays half to the merchant ($10 in this case). The customer is the one floating it--Groupon has theirs, the merchant has theirs.
- iqster 15y agoYou're right. The customer is the one doing the float. This margin seems high to me. And they still end up with a loss ... boggles the mind.
- jonknee 15y agoThey spend a ridiculous money on advertising and sales, so it's not too surprising too me. Their products are "free", but having a staff of 7,000+ means a tons of boots are on the ground to shake out those deals.