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I wrote a little about this: Another way to respond to this critique: Groupon could have theoretically solved this problem by adopting faster payment plans for

I wrote a little about this: Another way to respond to this critique: Groupon could have theoretically solved this problem by adopting faster payment plans for merchants. That would make theirs a worse business with lower cash flow, but it would help their PR (and perhaps their valuation). It’s counterintuitive that Groupon could make their business worse but make their valuation better—it depends on whether their share price is, at the margin, determined by the skeptics or the believers. ( http://www.digital-dd.com/hp-immaterial-usability-users/ http://www.digital-dd.com/hp-immaterial-usability-users/ )

ghshephard 15y ago
I don't understand, from Blodget: ". "As of June 30, Groupon had $680 million in current liabilities -- bills the company has to pay,".... "Meanwhile, Groupon only had $376 million of current assets with which to pay them." " If they pay their merchants faster, where would they get the money? I just checked at Wikipedia, and, "A Ponzi scheme is a fraudulent investment operation that pays returns to separate investors, not from any actual profit earned by the organization, but from their own money or money paid by subsequent investors. " It kind of sounds like existing merchants "Daily Deals" are being paid by new merchants. Because this isn't really an "investment" per se, I guess it's not illegal - but right about now I'd be a little cautious if I were a small business engaging with group on - at least determine what level of protection I have.
- pbreit 15y ago
  Calling this a ponzi scheme is a mistake. If you consider coupons merchandise and Groupon getting net 60 day terms it's just like any other retailer.
  - sp332 15y ago
    No, paying off earlier investors with later investor's money is a Ponzi scheme.
    - pbreit 15y ago
      Are you referring to the last funding round where a portion of the financing went to shareholders? That's not uncommon and I'm not really sure where you would draw the line. There's a buyer and seller on every stock transaction.

ghshephard 15y ago

I don't understand, from Blodget: ". "As of June 30, Groupon had $680 million in current liabilities -- bills the company has to pay,".... "Meanwhile, Groupon only had $376 million of current assets with which to pay them." " If they pay their merchants faster, where would they get the money? I just checked at Wikipedia, and, "A Ponzi scheme is a fraudulent investment operation that pays returns to separate investors, not from any actual profit earned by the organization, but from their own money or money paid by subsequent investors. " It kind of sounds like existing merchants "Daily Deals" are being paid by new merchants. Because this isn't really an "investment" per se, I guess it's not illegal - but right about now I'd be a little cautious if I were a small business engaging with group on - at least determine what level of protection I have.

pbreit 15y ago
Calling this a ponzi scheme is a mistake. If you consider coupons merchandise and Groupon getting net 60 day terms it's just like any other retailer.
- sp332 15y ago
  No, paying off earlier investors with later investor's money is a Ponzi scheme.
  - pbreit 15y ago
    Are you referring to the last funding round where a portion of the financing went to shareholders? That's not uncommon and I'm not really sure where you would draw the line. There's a buyer and seller on every stock transaction.