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The competition for most outlandish criticism of Groupon is getting really boring. All of these articles ignore the same basic facts. Groupon is spending a hug

The competition for most outlandish criticism of Groupon is getting really boring. All of these articles ignore the same basic facts. Groupon is spending a huge amount on customer acquisition. They've stated numerous times that this is a short-term competitive play, to try to create as much of an advantage as possible to counteract the dozens of clones by building up their brand awareness and subscriber list. The idea that they are a ponzi scheme or the next Madoff because they are choosing a fast-growth strategy is absurd. I might disagree that this is a smarter strategy than growing more slowly, but this doesn't prove that they're insolvent or something. Existing customers don't stop spending after one purchase, so the idea that they have to spend on acquisition in order to make money to cover operating costs is nonsense. They have total control over how much they spend on customer acquisition, and at a certain point will have to slow down. Again, you can disagree with their strategy, but there's no scam here. Likewise, there is no evidence that any majority of businesses who work with Groupon, or customers who purchase Groupons, are overwhelmingly dissatisfied with the value they get. Tons of business still agree to run groupons every day, including businesses that have run groupons many times. Obviously, it's not a great experience for everyone, and I'm not even arguing that in the long term this model will do well. But to say that Groupon doesn't do anything or provides no value just isn't backed up by any credible evidence, at least that's been present in all these threads. Boston is not Groupon's oldest or largest market. And the numbers in that article are to be expected, and aren't really "troubling" as the BI article's source states. Groupon is spending money to acquire more subscribers because the initial trove of low-hanging fruit has already been acquired. They're trying to keep a big market from rival companies, so they're going after people who are more difficult to acquire (and obviously therefor less likely to spend). Anyone who expects these more difficult acquisitions to spend the same amount per user as people who found their way to Groupon more easily is ridiculous. I'm not arguing that Groupon isn't overvalued, or that their model doesn't have problems. But the arguments that Groupon is a scam or not a real business or that they're going to have to close up shop any day now range from unsophisticated to dishonest.

shawndrost 15y ago
I'm in full agreement. Relatedly, why so much hatred for Groupon's ACSOI metric? If you believe you've got a great business, expansion via deficit spending is one possible strategy. If you're pursuing this strategy, you'll need metrics that show how you would be doing if you weren't expanding via deficit spending. Reasonable people can disagree about whether Groupon is a great business at its core, and whether the ACSOI accurately reflects how Groupon would be doing if they weren't expanding via deficit spending... but the widespread derision that they're "trying to claim they're profitable when they're not" seems intentionally obtuse.
- puredemo 15y ago
  It's just a bit off-putting that a company would try to justify a $10B - $30B valuation when they have never shown any net profit.
pbreit 15y ago
Why is a good post like this downvoted? I know HNers tend to disagree but the sentiment is for the most part spot on. Groupon is not a ponzi scheme. It operates like any other business that buys from vendors on net 60 terms. It can obviously dial down on acquisition spending and be left with a fabulously valuable asset of 100+ million opted-in subscribers/accounts. A list that it can market to very inexpensively.
- ForrestN 15y ago
  Thanks for the support. Clearly I have yet to master the paradigm of "adding value" that classifies it's increasingly clear that groupon is essentially a ponzi scheme with some graphic design. can't wait for the post mortem documentary a la "the smartest guys in the room" as more valuable than my comment. Will continue to try and adapt to the local culture.
  - pbreit 15y ago
    It's lame that HNers are so blind to the reality of the Groupon case. It's even more lame that some HN members use downvoting to express disagreement.
    - pbreit 15y ago
      If you disagree with a post, you should post a reply with your arguments. Downvoting should not be used for simple disagreement.
      - tokenadult 15y ago
        Downvoting should not be used for simple disagreement. That's nowhere in the Hacker News Guidelines. http://ycombinator.com/newsguidelines.html http://ycombinator.com/newsguidelines.html You are, of course, entitled to your opinion about how to use downvoting, but other users here are entitled to theirs. Here is what pg said about the matter 1280 days ago: http://news.ycombinator.com/item?id=117171 http://news.ycombinator.com/item?id=117171 "I think it's ok to use the up and down arrows to express agreement. Obviously the uparrows aren't only for applauding politeness, so it seems reasonable that the downarrows aren't only for booing rudeness." There have been refinements in the site software since then, notably the change of a few months ago to hide individual comment karma scores from readers other than the comment's individual author, but there has never been a statement from site management that downvotes must necessarily be explained. Sometimes the best way to respond to a comment that is not thoughtful and well informed is to downvote it. When pg wrote his post earlier this year "Ask HN: How to stave off decline of HN?" http://news.ycombinator.com/item?id=2403696 http://news.ycombinator.com/item?id=2403696 He wrote, "The problem has several components: comments that are (a) mean and/or (b) dumb that (c) get massively upvoted." By implication, some comments don't deserve any upvotes, and may indeed deserve downvotes without further subcomments.
r00fus 15y ago
None of this "land grab" reasoning answers my concern I raised earlier ( http://news.ycombinator.com/item?id=2870094 http://news.ycombinator.com/item?id=2870094 )... how is Groupon going to defend their landgrab? There are NO BARRIERS in this market, as far as anyone can explain to me. I'd love to hear any reasonable argument as to how Groupon will defend it's ground. It's not like the big boys (Google: Offers, Amazon: LivingSocial) are ignoring the space either.
- ForrestN 15y ago
  As. I said, I'm not convinced this will work. I think you raise a good question. Their argument would be that, like Amazon or any number of other companies that spend a ton of time at the beginning being unprofitable in competitive spheres, wthey are building up lots of forms of entrenchment that together constitute a barrier to entry. Things like brand awareness, relationships with large national merchants, mailing list, I'm sure they are working on systems to tailor deals to user's buying profile, "groupon now", travel deals, etc. Amazon's barrier is that they have so much available for purchase no one can compete with their breadth. If Groupon's list is the biggest, maybe they can leverage it to exclusive partnerships to the detriment of competitors. Again, I'm not sure this will work, but you're not calling them a scam. You just think they're overvalued, or that their competitive strategy is flawed. I would never argue that they are certain to succeed, I just think a lot of this Madoff nonsense is overblown.
- sunchild 15y ago
  I can tell you for sure: no one I've ever met is remotely loyal to Groupon. Groupon is viewed as, at best, a deal – at worst, an off-target annoyance. There are no meaningful barriers to entry. Margins will tend to zero in the face of competition. Users have no lasting connection to Groupon's web presence. Every new model propose by Groupon further erodes its original appeal: false scarcity. Meanwhile, there's a war for customer acquisition, with spending up to $40 per user, when it should be closer to $2.50. Anyone who gave this market a serious look saw these issues coming a thousand miles away.

shawndrost 15y ago

I'm in full agreement. Relatedly, why so much hatred for Groupon's ACSOI metric? If you believe you've got a great business, expansion via deficit spending is one possible strategy. If you're pursuing this strategy, you'll need metrics that show how you would be doing if you weren't expanding via deficit spending. Reasonable people can disagree about whether Groupon is a great business at its core, and whether the ACSOI accurately reflects how Groupon would be doing if they weren't expanding via deficit spending... but the widespread derision that they're "trying to claim they're profitable when they're not" seems intentionally obtuse.

puredemo 15y ago
It's just a bit off-putting that a company would try to justify a $10B - $30B valuation when they have never shown any net profit.

pbreit 15y ago

Why is a good post like this downvoted? I know HNers tend to disagree but the sentiment is for the most part spot on. Groupon is not a ponzi scheme. It operates like any other business that buys from vendors on net 60 terms. It can obviously dial down on acquisition spending and be left with a fabulously valuable asset of 100+ million opted-in subscribers/accounts. A list that it can market to very inexpensively.

ForrestN 15y ago
Thanks for the support. Clearly I have yet to master the paradigm of "adding value" that classifies it's increasingly clear that groupon is essentially a ponzi scheme with some graphic design. can't wait for the post mortem documentary a la "the smartest guys in the room" as more valuable than my comment. Will continue to try and adapt to the local culture.
- pbreit 15y ago
  It's lame that HNers are so blind to the reality of the Groupon case. It's even more lame that some HN members use downvoting to express disagreement.
  - pbreit 15y ago
    If you disagree with a post, you should post a reply with your arguments. Downvoting should not be used for simple disagreement.
    - tokenadult 15y ago
      Downvoting should not be used for simple disagreement. That's nowhere in the Hacker News Guidelines. http://ycombinator.com/newsguidelines.html http://ycombinator.com/newsguidelines.html You are, of course, entitled to your opinion about how to use downvoting, but other users here are entitled to theirs. Here is what pg said about the matter 1280 days ago: http://news.ycombinator.com/item?id=117171 http://news.ycombinator.com/item?id=117171 "I think it's ok to use the up and down arrows to express agreement. Obviously the uparrows aren't only for applauding politeness, so it seems reasonable that the downarrows aren't only for booing rudeness." There have been refinements in the site software since then, notably the change of a few months ago to hide individual comment karma scores from readers other than the comment's individual author, but there has never been a statement from site management that downvotes must necessarily be explained. Sometimes the best way to respond to a comment that is not thoughtful and well informed is to downvote it. When pg wrote his post earlier this year "Ask HN: How to stave off decline of HN?" http://news.ycombinator.com/item?id=2403696 http://news.ycombinator.com/item?id=2403696 He wrote, "The problem has several components: comments that are (a) mean and/or (b) dumb that (c) get massively upvoted." By implication, some comments don't deserve any upvotes, and may indeed deserve downvotes without further subcomments.

r00fus 15y ago

None of this "land grab" reasoning answers my concern I raised earlier ( http://news.ycombinator.com/item?id=2870094 http://news.ycombinator.com/item?id=2870094 )... how is Groupon going to defend their landgrab? There are NO BARRIERS in this market, as far as anyone can explain to me. I'd love to hear any reasonable argument as to how Groupon will defend it's ground. It's not like the big boys (Google: Offers, Amazon: LivingSocial) are ignoring the space either.

ForrestN 15y ago
As. I said, I'm not convinced this will work. I think you raise a good question. Their argument would be that, like Amazon or any number of other companies that spend a ton of time at the beginning being unprofitable in competitive spheres, wthey are building up lots of forms of entrenchment that together constitute a barrier to entry. Things like brand awareness, relationships with large national merchants, mailing list, I'm sure they are working on systems to tailor deals to user's buying profile, "groupon now", travel deals, etc. Amazon's barrier is that they have so much available for purchase no one can compete with their breadth. If Groupon's list is the biggest, maybe they can leverage it to exclusive partnerships to the detriment of competitors. Again, I'm not sure this will work, but you're not calling them a scam. You just think they're overvalued, or that their competitive strategy is flawed. I would never argue that they are certain to succeed, I just think a lot of this Madoff nonsense is overblown.
sunchild 15y ago
I can tell you for sure: no one I've ever met is remotely loyal to Groupon. Groupon is viewed as, at best, a deal – at worst, an off-target annoyance. There are no meaningful barriers to entry. Margins will tend to zero in the face of competition. Users have no lasting connection to Groupon's web presence. Every new model propose by Groupon further erodes its original appeal: false scarcity. Meanwhile, there's a war for customer acquisition, with spending up to $40 per user, when it should be closer to $2.50. Anyone who gave this market a serious look saw these issues coming a thousand miles away.