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Aside from the incredibly naive assertion that Groupon would maintain its current revenue with $0 marketing (OP, you realize that every company with appreciable

Aside from the incredibly naive assertion that Groupon would maintain its current revenue with $0 marketing (OP, you realize that every company with appreciable revenue spends at least some of their money on marketing, right?), the primarily troubling aspect was that the figures were deliberately misleading. Even if Groupon's intentions weren't so dubious, the implication that any of their valuation or justification for an IPO can be calculated based on only some of their expenses is absurd and dangerous to a general public that may (like this author) be easily taken in by their "accounting acrobatics." If their managers and finance team want to use this figure internally to justify jobs that they may or may not deserve, that's fine--but to use these ridiculous measures publicly is irresponsible at best, and actively deceitful at the other end. [Edit]: I almost didn't bite on the OP at all--I'm still not 100% sure it's not pure troll.

tptacek 15y ago
Aaron Swartz is probably not trolling you, to answer your totally unnecessary snarky aside.
- bcrescimanno 15y ago
  Is that a name I'm supposed to know? Honestly, this article came across as little more than shilling for Groupon; I really don't care who wrote it. I'm also curious as to how it's "unnecessarily snarky" to claim that a post like this might be trolling.
  - ajju 15y ago
    Aaron is quite well known on YC but it's not surprising that many people don't know about him. http://en.wikipedia.org/wiki/Aaron_Swartz http://en.wikipedia.org/wiki/Aaron_Swartz Having known him through his writings for several years, I can vouch that he is not a troll.
    - bcrescimanno 15y ago
      I think that's a fair response; I took some time to look him up myself after the above post--but I appreciate the extra context that he's generally well-known within HN. I also think it's fair to question whether such a lopsided opinion piece, opposed to the seemingly general prevalent thought, is indeed trolling. Perhaps his reputation says otherwise; but, that doesn't make it any less reasonable to question.
      - nl 15y ago
        I also think it's fair to question whether such a lopsided opinion piece, opposed to the seemingly general prevalent thought, is indeed trolling. Well reasoned opinions that are opposed the prevalent opinion are never trolling.
  - pbreit 15y ago
    Why is Groupon-supporting commentary considered trolling or shilling? The fact is the Gorupon's marketing spend is building an asset that has lasting value and accounting for such is not unreasonable. A 100 million opted-in email list has almost as much value next year as it does this year even if it stops growing.
    - bcrescimanno 15y ago
      Not entirely true when we start to look at repeat customer numbers, etc. Even if the list doesn't change, the number of purchases per customer will likely continue to decline over time. In that case, I think the best argument you can make is that their marketing budget is about more than typical marketing budgets: that is, they're building a valuable (if depreciating) asset. Fair enough, I think that's a legit argument. But they don't stop there; they actually claim that because their marketing expenses are geared towards asset building that they shouldn't count. That's a pretty big leap; at best, from the conclusion drawn above, their marketing budget could considered as a typical company might consider manufacturing or development cost. That is, if Groupon's value is truly derived (at least in part) from the size of their network, then the costs associated with building that network are analogous to building product in more traditional companies. I agree that their marketing spend has different impact to their business than other businesses; but I don't believe that means they can just pretend they aren't spending that money.
      - nl 15y ago
        the number of purchases per customer will likely continue to decline over time. That's not correct. While the list is growing the number of purchases per customer will probably decrease, and when it is shrinking I would imagine it would increase (because the people who get no value from it will remove themselves, while those who get value will stay on the list) If GroupOn can continue to provide value to customers they will keep using it. Much of their business is currently in the "door buster" special type offers, but it is easy to see them offering smaller, 10%-off-type offers from retailers they have a relationship with in addition to the "door buster" offers. Places like supermarkets would pay for that, and consumers would get benefit too. the costs associated with building that network are analogous to building product in more traditional companies. Yes, exactly. It's not abnormal for companies that have huge up-front investments to report their operational financial situation differently to the operational expenses. Think of sports stadium operating companies, or companies that build toll-roads, railways of other infrastructure: they have huge upfront costs, but report that cost by amortising it over the operating life of the infrastructure. At the same time, they also report their finances without taking this cost into account, because that cost is more relevant to their business. I guess GroupOn could have tried to amortise the customer acquisition costs, but that would be hugely speculative. In this case the raw operating numbers were more useful. GroupOn may or may not have problems with their business model. That is orthogonal to the fact that reporting that ACSOI number made sense and was useful for any investor to know.

tptacek 15y ago

Aaron Swartz is probably not trolling you, to answer your totally unnecessary snarky aside.

bcrescimanno 15y ago
Is that a name I'm supposed to know? Honestly, this article came across as little more than shilling for Groupon; I really don't care who wrote it. I'm also curious as to how it's "unnecessarily snarky" to claim that a post like this might be trolling.
- ajju 15y ago
  Aaron is quite well known on YC but it's not surprising that many people don't know about him. http://en.wikipedia.org/wiki/Aaron_Swartz http://en.wikipedia.org/wiki/Aaron_Swartz Having known him through his writings for several years, I can vouch that he is not a troll.
  - bcrescimanno 15y ago
    I think that's a fair response; I took some time to look him up myself after the above post--but I appreciate the extra context that he's generally well-known within HN. I also think it's fair to question whether such a lopsided opinion piece, opposed to the seemingly general prevalent thought, is indeed trolling. Perhaps his reputation says otherwise; but, that doesn't make it any less reasonable to question.
    - nl 15y ago
      I also think it's fair to question whether such a lopsided opinion piece, opposed to the seemingly general prevalent thought, is indeed trolling. Well reasoned opinions that are opposed the prevalent opinion are never trolling.
- pbreit 15y ago
  Why is Groupon-supporting commentary considered trolling or shilling? The fact is the Gorupon's marketing spend is building an asset that has lasting value and accounting for such is not unreasonable. A 100 million opted-in email list has almost as much value next year as it does this year even if it stops growing.
  - bcrescimanno 15y ago
    Not entirely true when we start to look at repeat customer numbers, etc. Even if the list doesn't change, the number of purchases per customer will likely continue to decline over time. In that case, I think the best argument you can make is that their marketing budget is about more than typical marketing budgets: that is, they're building a valuable (if depreciating) asset. Fair enough, I think that's a legit argument. But they don't stop there; they actually claim that because their marketing expenses are geared towards asset building that they shouldn't count. That's a pretty big leap; at best, from the conclusion drawn above, their marketing budget could considered as a typical company might consider manufacturing or development cost. That is, if Groupon's value is truly derived (at least in part) from the size of their network, then the costs associated with building that network are analogous to building product in more traditional companies. I agree that their marketing spend has different impact to their business than other businesses; but I don't believe that means they can just pretend they aren't spending that money.
    - nl 15y ago
      the number of purchases per customer will likely continue to decline over time. That's not correct. While the list is growing the number of purchases per customer will probably decrease, and when it is shrinking I would imagine it would increase (because the people who get no value from it will remove themselves, while those who get value will stay on the list) If GroupOn can continue to provide value to customers they will keep using it. Much of their business is currently in the "door buster" special type offers, but it is easy to see them offering smaller, 10%-off-type offers from retailers they have a relationship with in addition to the "door buster" offers. Places like supermarkets would pay for that, and consumers would get benefit too. the costs associated with building that network are analogous to building product in more traditional companies. Yes, exactly. It's not abnormal for companies that have huge up-front investments to report their operational financial situation differently to the operational expenses. Think of sports stadium operating companies, or companies that build toll-roads, railways of other infrastructure: they have huge upfront costs, but report that cost by amortising it over the operating life of the infrastructure. At the same time, they also report their finances without taking this cost into account, because that cost is more relevant to their business. I guess GroupOn could have tried to amortise the customer acquisition costs, but that would be hugely speculative. In this case the raw operating numbers were more useful. GroupOn may or may not have problems with their business model. That is orthogonal to the fact that reporting that ACSOI number made sense and was useful for any investor to know.