8 ms·

It's almost as if people derive personal satisfaction from poking holes in Groupon's success (or any startup, for that matter). Groupon has no viable business m

It's almost as if people derive personal satisfaction from poking holes in Groupon's success (or any startup, for that matter). Groupon has no viable business model, people will get tired of Zynga's games, Twitter can't monetize, Facebook will be killed by Google+/is useless/the ads on it aren't worth anything, etc. Every time one of these things gets pointed out, people show up and start high-fiving each other, say they've been saying this all along, etc. I really don't understand this part of human psychology. We cheer entrepreneurs on, until they see a massive success, at which point we feel compelled to point out that their achievement is meaningless and we knew it all along. Are people really that jealous?

deleted 15y ago
[deleted]
davedx 15y ago
Could be jealousy, but I think another side of it is those of us who saw the DotCom bubble can still be pretty cynical about web-based business models.
danilocampos 15y ago
I think the subtext to a lot of Groupon hate is the suspicion that their success is going to come at the expense of honest but smaller players. It's legitimate to be concerned that an insolvent Groupon could leave thousands of small businesses without promised rev share from promotions. It's legitimate to be concerned that an over-zealous sales team will make one-sided deals that favor Groupon and shaft the small business owner. And it's legitimate to be concerned that practices not publicly disclosed, along with obviously goofy accounting, could mean that IPO investors could be buying shares in a shady, radioactive concern. I saw Andrew Mason be asked, point-blank, if his business was sustainable. The brittle, curt, brief response, when compared to his otherwise exuberant, voluminous presence, left me pretty startled – and planted the seeds of my personal skepticism. To me, the many people looking askance at Groupon have no beef with their success. The beef seems largely about the source of that success.
cletus 15y ago
There are certainly cases of naysayers besmirching companies and entrepreneurs. There are also cheerleaders who get sucked into hype and think every new thing is going to change the world forever. The truth of course is somewhere in between. You can't judge people or what they say on whether it's positive or negative but on the merit of what's said. I for one have been critical of Groupon [1], even before the S1 filing. Large funding rounds to pay out early investors prior to an expected IPO are always a red flag for me but it goes way beyond that: dodgy accounting practices (ie treating customer acquisition as an extraordinary cost), account risk, the payment model that encourages last-ditch efforts by failing businesses to stay alive, the fact that Groupon's model in reality suits very few businesses, customers aren't particularly loyal or valuable and so on. As for Twitter, my personal opinion is that Twitter is one of those phenomona that is magnified in the Valley bubble. Outside of the Valley, it seems it's used to follow celebrities and most people don't know about it. I believe their own user figures are exaggerated (Twitter publishes figures on registered accounts not N-day usage like Facebook and others do). Also the 140-character limit and the huge reliance on third-party clients present huge barriers to monetization. I can't say I've ever said anything negative about Zynga. They produce games that operate (very well) on human compulsion. All they really need to do is keep introducing new games and refreshing the old. The one huge danger for Zynga has is their almost total reliance on Facebook. As for Google+ (disclaimer: I work for Google), I like what we're doing here but success is by no means guaranteed. The biggest problem for Google+ (IMHO) is that people are tired of using social networking not that people are tired of using Facebook. I also believe that Google does a much better job of respecting user data and privacy and it would be good for the Internet as a whole if Facebook where not to be a monopoly on identity and social networking. None of that guarantees success. Or failure for that matter. I also think the value of social search is completely over-exaggerated. The biggest innovation in the early days of the Internet was that suddenly you could find information from everyone in the (connected) world, not just your circle of friends and whatever print publications you had access to. The idea that we want to go back (even in part) just seems backward to me, especially given that most people consume information rather than produce recommendations. What makes Google so successful in advertising (compared to any other company on the Internet) is intent. The act of searching for something means you want to find out more about it, find where to buy it maybe, etc. Let's face it: advertising in almost all other sites is an intrusion and a distraction that doesn't match out intent (of, say, sharing photos, posting updates or whatever). So count me as being negative on Groupon. I think of all big IPOs for some years, it is the dodgiest and it strikes me that they're trying to cash out before the bubble bursts. To attribute my reaction as some flaw in human psychology that simply wants to drag others down however is rather dismissive of the arguments I make and those made by many far more erudite than I. [1]: http://news.ycombinator.com/item?id=2870186 http://news.ycombinator.com/item?id=2870186
iand 15y ago
Some of us have a healthy suspicion of large companies. I've seen so many lose their way, forget employees and customers are individuals and grow arrogant and lazy. For me its not jealousy or resentment at success, just a preference for successful companies that operate at human scale.
jellicle 15y ago
I'm pleased for success which is built on providing real value to real people. I'm not pleased at, say, Bernie Madoff's success. (Over 15 highly successful years in business, and only one unsuccessful one!) IMHO, he wasn't providing real value to people and his apparent success was only due to fraudulent accounting. According to Wikipedia, Madoff's brother invested $32,000 and received profits of $16 million - an impressive rate of return. Am I a nattering nabob of negativity for poo-pooing this "success"? I believe Groupon is in the Madoff category, or close to it...
- pbreit 15y ago
  Comparing Groupon to Madoff is a bit of a stretch.
  - pbreit 15y ago
    Why the down vote?
jamiequint 15y ago
The point is that its not real success, its fake success propped up by massive funding rounds and there are numbers to back it up. Note that their ARPU (for customers) is less than their marketing cost. Fixing this # before growing is what Clayton Christensen is talking about when he says "impatient for profit but patient for growth". Groupons unit economics suck and they're not getting better. Revenue and subscriber growth The median number of Groupons sold to each Groupon customer (someone who has bought anything): 1. The median number of Groupons sold to each person on Groupon’s mailing list: 0. Subscribers and acquisition cost Percentage of mailing list who has purchased even one Groupon: 20%. Cost per new list subscriber: $5.37. Cost per new customer: $24.08. Real revenue per subscriber: $3.43. Real revenue per customer: $17.55 (less than acquisition cost — keep in mind most people buy only 1). Real revenue per Groupon sold: $10.49 (less than acquisition cost). Amount spent on marketing, full year 2010: $241.5 million. Amount spent on marketing, first half of 2011: $345.1 million. Source: http://blog.agrawals.org/2011/08/15/the-terrible-numbers-that-groupon-doesnt-want-you-to-focus-on/ http://blog.agrawals.org/2011/08/15/the-terrible-numbers-tha...
- ngsayjoe 15y ago
  Q: What's wrong with Groupon? A: Absolutely nothing! It is truly a company that lives by their words when they pitch to their merchants, which is "Lose Money On Every Sale!"
wnight 15y ago
> It's almost as if people derive personal satisfaction from poking holes in Yes, many hackers/engineers like fixing things. The first step is to identify the problems. It's almost as if people derive personal satisfaction from playing apologist for anything, no matter how crazy or unadvised. > I really don't understand this part of human psychology. We cheer entrepreneurs on, until they see a massive success What's a massive success though, a bubble supported entirely through hype and start-up capital? Where is the real success, as in, the expected belief to be able to continue to turn some money into more money in the future, as a result of providing value to customers? Maybe if you thought about what a sustainable business model was you'd understand why the apparent lack of one is such an issue with other professionals in field. If they weren't soliciting investment I doubt anyone would care but as long as they are we should be thankful for the wisely cynical.
clobber 15y ago
Groupon is exploiting small businesses. This has nothing to do with jealousy and has everything to do with what's right and what's wrong.
dave_sullivan 15y ago
Nobody likes a winner... But, to be fair, if groupon can't turn a profit on 800 million dollars+ of revenue, they may have a problem.
pnathan 15y ago
Really? The satisfaction is that Groupon was using some pretty weird accounting measures to claim profitability, but was backed down to use usual accounting measures, which show they are scarily in the red. The vast amount of advertising they've done probably didn't endear them to geeks, either.
dockd 15y ago
Until they see a massive success? Are we defining massive success as finding more investors to give them money or making money? Maybe as an employee the two are equivalent but as an investor you're really hoping for the latter. > and we knew it all along Agreed on this. Think of a tech company that doesn't exist, say DEC. Were they a success or a failure? The answer of depends on when you ask the question. Is Microsoft currently a success or a failure? What about 10 years from now? It reminds me of the person in the gym who, circa 2001, declared he'd been "predicting the stock market would fall for years". :)
deleted 15y ago
[deleted]
gojomo 15y ago
Be careful of summing together reactions from different people as if they represented a single common or average reaction. There are loud critics of each your examples... but very few people, other than the relentlessly negative, are likely to be sour on them all. The fact that there are enough naysayers to fill any given comment-thread or link-aggregator is just evidence of the breadth and opinion-diversity of the audience now commenting, and that our modern filtering systems especially promote dissent and controversy. (I say this as someone who thinks Facebook has great prospects, Twitter has challenges but will probably figure something out to justify its recent valuations, Zynga may be questionable on social-value grounds but will likely remain a strong business... and yet there's something fishy about Groupon, from its top-level accounting to its street-level dealings with small-businesses and customers, that makes me think by 2013 Groupon could be considered Chicago's Enron.)
sdfkdfdfjdfng 15y ago
What's your point? We shouldn't be poking holes in faulty business models? I don't think that's a good idea. Groupon is quite embarrassing, the Pets.com of web 2.0 for sure. On top of that, the founders are greedy crooks. I think Twitter is in a far better position...it has taken me a while to realize this, but the truth is that they don't need a business model, really, they can just sell their data to people who do have a business model (like Google). Twitter will sell when it can get a really good bidding war between FB and Google, and maybe MS too. Now, they may screw it up and only get a few million, but this is still going to be a huge success by non-silicon valley standards.
- pbreit 15y ago
  Can you back up calling Groupon's founders "greedy crooks"? That's quite an accusation.
  - pbreit 15y ago
    Why the downvote? "crooks" implies criminality. Is that really what is being suggested?
yid 15y ago
Few can tolerate the success of others in large doses, especially when they are involved in the same activity and have achieved less. It's not unique to entrepreneurship nor technology.
phereford 15y ago
Let's remove the emotional out of the equation (jealousy, envy, etc). Groupon has had success (I won't say massive b/c I can't quantify massive). The reason people are poking holes in their business viability is strictly due to their recent SEC filings for an upcoming IPO. Companies that do well on the stock exchange are those that are able to show profitability. Do some business on the exchange miss on earnings/profit margins? 100%. It is probably a 50/50 coin flip on whether or not a company is going to hit their earnings reports. Why people are "attacking" Groupon is because of their somewhat odd use of CSOI (which is vastly different from adjusted CSOI). To run a business that is publicly traded, you have to show that costs are in order so that you can reach probability. Groupon has had somewhat exploding costs to grow quicker than their competitors (fine by me). But using history as an indicator of profitability in the future is what has everyone in a tizzy about Groupon's business viability.

deleted 15y ago

[deleted]

davedx 15y ago

Could be jealousy, but I think another side of it is those of us who saw the DotCom bubble can still be pretty cynical about web-based business models.

danilocampos 15y ago

I think the subtext to a lot of Groupon hate is the suspicion that their success is going to come at the expense of honest but smaller players. It's legitimate to be concerned that an insolvent Groupon could leave thousands of small businesses without promised rev share from promotions. It's legitimate to be concerned that an over-zealous sales team will make one-sided deals that favor Groupon and shaft the small business owner. And it's legitimate to be concerned that practices not publicly disclosed, along with obviously goofy accounting, could mean that IPO investors could be buying shares in a shady, radioactive concern. I saw Andrew Mason be asked, point-blank, if his business was sustainable. The brittle, curt, brief response, when compared to his otherwise exuberant, voluminous presence, left me pretty startled – and planted the seeds of my personal skepticism. To me, the many people looking askance at Groupon have no beef with their success. The beef seems largely about the source of that success.

cletus 15y ago

There are certainly cases of naysayers besmirching companies and entrepreneurs. There are also cheerleaders who get sucked into hype and think every new thing is going to change the world forever. The truth of course is somewhere in between. You can't judge people or what they say on whether it's positive or negative but on the merit of what's said. I for one have been critical of Groupon [1], even before the S1 filing. Large funding rounds to pay out early investors prior to an expected IPO are always a red flag for me but it goes way beyond that: dodgy accounting practices (ie treating customer acquisition as an extraordinary cost), account risk, the payment model that encourages last-ditch efforts by failing businesses to stay alive, the fact that Groupon's model in reality suits very few businesses, customers aren't particularly loyal or valuable and so on. As for Twitter, my personal opinion is that Twitter is one of those phenomona that is magnified in the Valley bubble. Outside of the Valley, it seems it's used to follow celebrities and most people don't know about it. I believe their own user figures are exaggerated (Twitter publishes figures on registered accounts not N-day usage like Facebook and others do). Also the 140-character limit and the huge reliance on third-party clients present huge barriers to monetization. I can't say I've ever said anything negative about Zynga. They produce games that operate (very well) on human compulsion. All they really need to do is keep introducing new games and refreshing the old. The one huge danger for Zynga has is their almost total reliance on Facebook. As for Google+ (disclaimer: I work for Google), I like what we're doing here but success is by no means guaranteed. The biggest problem for Google+ (IMHO) is that people are tired of using social networking not that people are tired of using Facebook. I also believe that Google does a much better job of respecting user data and privacy and it would be good for the Internet as a whole if Facebook where not to be a monopoly on identity and social networking. None of that guarantees success. Or failure for that matter. I also think the value of social search is completely over-exaggerated. The biggest innovation in the early days of the Internet was that suddenly you could find information from everyone in the (connected) world, not just your circle of friends and whatever print publications you had access to. The idea that we want to go back (even in part) just seems backward to me, especially given that most people consume information rather than produce recommendations. What makes Google so successful in advertising (compared to any other company on the Internet) is intent. The act of searching for something means you want to find out more about it, find where to buy it maybe, etc. Let's face it: advertising in almost all other sites is an intrusion and a distraction that doesn't match out intent (of, say, sharing photos, posting updates or whatever). So count me as being negative on Groupon. I think of all big IPOs for some years, it is the dodgiest and it strikes me that they're trying to cash out before the bubble bursts. To attribute my reaction as some flaw in human psychology that simply wants to drag others down however is rather dismissive of the arguments I make and those made by many far more erudite than I. [1]: http://news.ycombinator.com/item?id=2870186 http://news.ycombinator.com/item?id=2870186

iand 15y ago

Some of us have a healthy suspicion of large companies. I've seen so many lose their way, forget employees and customers are individuals and grow arrogant and lazy. For me its not jealousy or resentment at success, just a preference for successful companies that operate at human scale.

jellicle 15y ago

I'm pleased for success which is built on providing real value to real people. I'm not pleased at, say, Bernie Madoff's success. (Over 15 highly successful years in business, and only one unsuccessful one!) IMHO, he wasn't providing real value to people and his apparent success was only due to fraudulent accounting. According to Wikipedia, Madoff's brother invested $32,000 and received profits of $16 million - an impressive rate of return. Am I a nattering nabob of negativity for poo-pooing this "success"? I believe Groupon is in the Madoff category, or close to it...

pbreit 15y ago
Comparing Groupon to Madoff is a bit of a stretch.
- pbreit 15y ago
  Why the down vote?

jamiequint 15y ago

The point is that its not real success, its fake success propped up by massive funding rounds and there are numbers to back it up. Note that their ARPU (for customers) is less than their marketing cost. Fixing this # before growing is what Clayton Christensen is talking about when he says "impatient for profit but patient for growth". Groupons unit economics suck and they're not getting better. Revenue and subscriber growth The median number of Groupons sold to each Groupon customer (someone who has bought anything): 1. The median number of Groupons sold to each person on Groupon’s mailing list: 0. Subscribers and acquisition cost Percentage of mailing list who has purchased even one Groupon: 20%. Cost per new list subscriber: $5.37. Cost per new customer: $24.08. Real revenue per subscriber: $3.43. Real revenue per customer: $17.55 (less than acquisition cost — keep in mind most people buy only 1). Real revenue per Groupon sold: $10.49 (less than acquisition cost). Amount spent on marketing, full year 2010: $241.5 million. Amount spent on marketing, first half of 2011: $345.1 million. Source: http://blog.agrawals.org/2011/08/15/the-terrible-numbers-that-groupon-doesnt-want-you-to-focus-on/ http://blog.agrawals.org/2011/08/15/the-terrible-numbers-tha...

ngsayjoe 15y ago
Q: What's wrong with Groupon? A: Absolutely nothing! It is truly a company that lives by their words when they pitch to their merchants, which is "Lose Money On Every Sale!"

wnight 15y ago

> It's almost as if people derive personal satisfaction from poking holes in Yes, many hackers/engineers like fixing things. The first step is to identify the problems. It's almost as if people derive personal satisfaction from playing apologist for anything, no matter how crazy or unadvised. > I really don't understand this part of human psychology. We cheer entrepreneurs on, until they see a massive success What's a massive success though, a bubble supported entirely through hype and start-up capital? Where is the real success, as in, the expected belief to be able to continue to turn some money into more money in the future, as a result of providing value to customers? Maybe if you thought about what a sustainable business model was you'd understand why the apparent lack of one is such an issue with other professionals in field. If they weren't soliciting investment I doubt anyone would care but as long as they are we should be thankful for the wisely cynical.

clobber 15y ago

Groupon is exploiting small businesses. This has nothing to do with jealousy and has everything to do with what's right and what's wrong.

dave_sullivan 15y ago

Nobody likes a winner... But, to be fair, if groupon can't turn a profit on 800 million dollars+ of revenue, they may have a problem.

pnathan 15y ago

Really? The satisfaction is that Groupon was using some pretty weird accounting measures to claim profitability, but was backed down to use usual accounting measures, which show they are scarily in the red. The vast amount of advertising they've done probably didn't endear them to geeks, either.

dockd 15y ago

Until they see a massive success? Are we defining massive success as finding more investors to give them money or making money? Maybe as an employee the two are equivalent but as an investor you're really hoping for the latter. > and we knew it all along Agreed on this. Think of a tech company that doesn't exist, say DEC. Were they a success or a failure? The answer of depends on when you ask the question. Is Microsoft currently a success or a failure? What about 10 years from now? It reminds me of the person in the gym who, circa 2001, declared he'd been "predicting the stock market would fall for years". :)

deleted 15y ago

[deleted]

gojomo 15y ago

Be careful of summing together reactions from different people as if they represented a single common or average reaction. There are loud critics of each your examples... but very few people, other than the relentlessly negative, are likely to be sour on them all. The fact that there are enough naysayers to fill any given comment-thread or link-aggregator is just evidence of the breadth and opinion-diversity of the audience now commenting, and that our modern filtering systems especially promote dissent and controversy. (I say this as someone who thinks Facebook has great prospects, Twitter has challenges but will probably figure something out to justify its recent valuations, Zynga may be questionable on social-value grounds but will likely remain a strong business... and yet there's something fishy about Groupon, from its top-level accounting to its street-level dealings with small-businesses and customers, that makes me think by 2013 Groupon could be considered Chicago's Enron.)

sdfkdfdfjdfng 15y ago

What's your point? We shouldn't be poking holes in faulty business models? I don't think that's a good idea. Groupon is quite embarrassing, the Pets.com of web 2.0 for sure. On top of that, the founders are greedy crooks. I think Twitter is in a far better position...it has taken me a while to realize this, but the truth is that they don't need a business model, really, they can just sell their data to people who do have a business model (like Google). Twitter will sell when it can get a really good bidding war between FB and Google, and maybe MS too. Now, they may screw it up and only get a few million, but this is still going to be a huge success by non-silicon valley standards.

pbreit 15y ago
Can you back up calling Groupon's founders "greedy crooks"? That's quite an accusation.
- pbreit 15y ago
  Why the downvote? "crooks" implies criminality. Is that really what is being suggested?

yid 15y ago

Few can tolerate the success of others in large doses, especially when they are involved in the same activity and have achieved less. It's not unique to entrepreneurship nor technology.

phereford 15y ago

Let's remove the emotional out of the equation (jealousy, envy, etc). Groupon has had success (I won't say massive b/c I can't quantify massive). The reason people are poking holes in their business viability is strictly due to their recent SEC filings for an upcoming IPO. Companies that do well on the stock exchange are those that are able to show profitability. Do some business on the exchange miss on earnings/profit margins? 100%. It is probably a 50/50 coin flip on whether or not a company is going to hit their earnings reports. Why people are "attacking" Groupon is because of their somewhat odd use of CSOI (which is vastly different from adjusted CSOI). To run a business that is publicly traded, you have to show that costs are in order so that you can reach probability. Groupon has had somewhat exploding costs to grow quicker than their competitors (fine by me). But using history as an indicator of profitability in the future is what has everyone in a tizzy about Groupon's business viability.