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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 ar

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.

bcrescimanno 15y ago
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.
- olivercameron 15y ago
  You really don't think Groupon has a plan, however flawed, to go from large revenues to large profits?
  - bcrescimanno 15y ago
    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.
    - dmarquis 15y ago
      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.

bcrescimanno 15y ago

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.

olivercameron 15y ago
You really don't think Groupon has a plan, however flawed, to go from large revenues to large profits?
- bcrescimanno 15y ago
  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.
  - dmarquis 15y ago
    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.