9 ms·

The Missed Red Flags on Groupon

105 points by OstiaAntica 15y ago

goodweeds 15y ago
Who missed these red flags? Nobody I know in the valley. We've all been mocking @Groupon as an un-defensible and unsustainable ponzi scheme. For at least a year and a half there have been enough major news organizations backing this sentiment. Come on. Online coupons. Groupon is the hype of boo.com, webvan, and Kozmo.com all rolled into one, with greedy investors hoping they can make a quick buck before people realized what happened. Groupon is a glorified wordpress blog with 10,000 sales reps propping up the fake market with unsustainable or warranted demand. It's like watching Boiler Room play out in real life. There is no business process innovation here or technical innovation. The only innovation here is using huge marketing dollars to perpetuate a pump and dump ponzi scheme long enough for an IPO. Oh wait, that's not innovative, they did the same thing with dozens of companies a decade ago just before the first web bubble burst.
- pitdesi 15y ago
  I am not at all a Groupon apologist (I think their base business is declining and doesn't make sense for most local businesses in the long-term), but you have gone way overboard by comparing Groupon to boo, webvan, and kozmo. For all its faults, Groupon is on track for $1.5Bn in NET revenues (this doesn't include pass-through that they initially included in revenues) this year, and will probably still IPO somewhere around 10 billion dollars. All of the companies you mentioned only existed for 2 years before being liquidated. As for everyone in the valley knowing Groupon was a ponzi scheme for the past year and a half - then the folks from Battery, Accel, Kleiner Perkins, Greylock, NEA, TCV, Silver Lake, etc (all of whom made investments in Groupon this year) would have to be complete idiots to invest in Groupon, and that is certainly not true. Sidenote- a quick reminder on what it was like in the 00 bubble that you reference: http://feefighters.com/blog/ff_infographic/tech-boom-or-bubble-lets-look-at-the-data/ http://feefighters.com/blog/ff_infographic/tech-boom-or-bubb...
  - Retric 15y ago
    You can call a loan Revenue that does not make it so. And when you need advertizing to sustain your business you don't get to call it revenue neutral, it's still just another expense. June 2nd, 2011 "Groupon lost $456 million last year, and another $147 million last quarter." http://techcrunch.com/2011/06/02/groupon-growth-2-6-billion-revenue-run-rate-charts/ http://techcrunch.com/2011/06/02/groupon-growth-2-6-billion-... PS: The #1 investing rule is the second a company starts playing games with their books avoid them.
    - pbreit 15y ago
      Much of business consists of selling product before paying vendors. Have you heard of "Net 30/60/90" terms? The advertising is to acquire customers. But then it can obviously promote deals to existing customers for essentially no cost. This is also the reason it wasn't crazy to consider the mailing list an asset and account for it accordingly. Progress is only made when someone pushes.
      - anigbrowl 15y ago
        What, they are going to lay off their massive sales staff and the vendors are going to keep coming back to offer zero-margin daily deals because...? This company doesn't have a USP; its business model is being cloned left and right, and customers have zero brand loyalty to the coupon broker. I can't understand your unshakeable faith in it. Your pricetack.com project looks vastly more interesting to me than Groupon ever has.
        goodweeds 15y ago
        Even then, Groupon was basically a modified rip-off of Woot.com and other deals sites. Bernie Madoff would be proud of Groupon.
  - byoung2 15y ago
    but you have gone way overboard by comparing Groupon to boo, webvan, and kozmo. At least those companies had tangible assets to liquidate (boo had inventory, webvan had a distribution network, and Kozmo had a stash of DVD's). Groupon has posted impressive revenue numbers (but still no profit) using an unsustainable model of aggressive spending on advertising and sales team headcount. With growth slowing, increasing backlash from merchants, and questions about their accounting methods, Groupon is on the decline. Maybe TheGlobe.com (http://en.wikipedia.org/wiki/TheGlobe.com http://en.wikipedia.org/wiki/TheGlobe.com) is a more fitting comparison.
- hkmurakami 15y ago
  > Who missed these red flags? Nobody I know in the valley. I'm sure Average Joe America drank the proverbial Cool Aid with respect to Groupon. We must remember that the vast majority of America doesn't care to do critical analysis of yet another hot internet startup; they're going to believe what's fed to them. Average America is not the Valley. It's good that non Hacker News / Quora media resources are publicly criticizing Groupon now. I was terribly worried that the uninformed Mom and Pop investors would get caught up in the Groupon Ponzi scheme when they would IPO. For now, it seems that the likelihood and magnitude of this happening are much lower now.
- unreal37 15y ago
  Exactly my reaction. Even reading only the headline, "The Missed Red Flags of Groupon", my first reaction was "who missed them?" From the owners taking 90% of the investors money for themselves, the fact their advertising costs almost match their sales, the fact that they make $270 million Q1'11 and still managed to lose $140 million... it all smells. Groupon is a Ponzi scheme, and all the so-called smart investors and underwriters are just hoping to cash out before the pyramid collapses. There is nobody who seriously things this is a real long term sustainable business is there? Can't be.
  - fennecfoxen 15y ago
    Yeah - Groupon seems like it could be a semi-reasonable business, if they can get their customer-acquisition costs under control, but the sky-high valuations (Google's $3 billion and up) are completely ridiculous and buying Groupon's stock is a losing game at this point.
- gojomo 15y ago
  I think Groupon's model preys on small businesses unskilled in accrual accounting and pricing strategy. Also, both my readings and personal interactions have given me the impression that in their hyper-growth they have become a deeply dishonest organization. All that said, however, there are still some interesting non-predatory wrinkles in their model. The single deal at a time served to create consumer focus. The trigger threshold gave merchants confidence a deal would have a certain minimum impact. The time limit and trigger threshold served as an especially powerful call-to-action: now or never. Though Groupon quickly tuned things (and grew) such that every deal was essentially guaranteed to 'tip', the group-threshold-mechanics were important for accelerating early adoption, overcoming vendor- and consumer- resistance to coordinated action. This mechanism, rooted in economics and game theory and related to the 'assurance contact' concept, still has utility for other endeavors, among them Kickstarter, even if that mechanic standing alone does not provide any sort of defensible advantage. By all means, throw out the baby. But don't forget there's still something interesting in that bathwater.
  - fennecfoxen 15y ago
    Oh, sure, there's something in that bathwater... it's just not worth $30 billion. Not even close.
- sliverstorm 15y ago
  Who missed these red flags? Nobody I know in the valley It is true 'the valley' would seem to have caught on, but don't forget the sizeable period of time when Groupon was the darling of this very website. If memory serves, HN opinion of Groupon didn't start to tank until the founders sold a big chunk of their shares, whenever that was. I'm pretty sure when the Google offer/rumor was afloat, everyone at HN applauded Groupon for rejecting.
  - veyron 15y ago
    Prima facie, there's no reason to believe that groupon was unprofitable. And since there's no legal obligation to release their financials, we were left to trust Groupon's numbers. That being said, the amount of money taken off the table was the first real warning sign.
Gaussian 15y ago
Sure. Groupon has a few problems. But the idea that an underwriting firm such as Goldman or Morgan is some kind of arbiter of wholesome business fundamentals is ridiculous. Sorkin knows better than to suggest that.
untangle 15y ago
"[we are]...not one of those uglies." (CEO using sonogram analogy in memo to employees.) This is the $310M man? Are you kidding me? Next he'll be off killing elephants with the GoDaddy guy. Bob
- malbs 15y ago
  The "one of those uglies" quote is from the CEO, Andrew Mason. The guy who took $319 million was Eric Lefkofsky (Groupon chairman). Nice pay day.
tomasienrbc 15y ago
All it took for me was for their revenue model to be revealed. Discounts of 50-90% THEN they take 50-90% of what is paid by the customer? Borderline robbery.
- startupstella 15y ago
  It depends on how the merchant treats a Groupon customer. They may make up for the customer acquisition cost by offering less (hurtful to them) discounts in the future. Take this spa for example, they did a follow up for Groupon customers offering the same 50% deal, but this time they kept Groupon's share: http://feefighters.com/blog/who-groupon-benefits-the-contractor-vs-the-business/ http://feefighters.com/blog/who-groupon-benefits-the-contrac...
  - tomasienrbc 15y ago
    And I think we can all agree that hurts Groupon in the longterm. So.... doesn't seem like it depends at all, regardless people are trying to avoid using Groupon.
tomasienrbc 15y ago
We haven't even SEEN the local merchants bail on Groupon yet, and that is going to happen. Believe me. I deal with disenfranchised Groupon merchants everyday, and they almost all hate it. The craziest part is they're all considering doing it AGAIN just because they feel blackmailed into it by the "if I don't do it, my neighbor will. At least this way I might get something out of it" situation. I love selling an alternative, because it sells itself. You're NOT like Groupon? SOLD!
Fliko 15y ago
Hindsight bias is probably the most important 2 words here.
aresant 15y ago
Groupon is a huge, fun target but there are compelling fundamentals under all the noise and pre-IPO PR blunders: 1) "66% of Groupon deals are profitable for the seller, and 40% of businesses would not use Groupon again, according to a Rice University study." http://www.quora.com/Groupon-IPO-S-1-Filing-June-2011/What-is-Groupons-redemption-rate http://www.quora.com/Groupon-IPO-S-1-Filing-June-2011/What-i... 2) Groupon has a hidden vat of PURE margin - breakage / un-redeemed deals that could be a shocking amount of money once financials are disclosed. 3) They have enormous growth potential in key markets which is why they are spending money like drunken sailors on customer acquisition. They can grow by 10x in the restaurant space alone. http://answers.ask.com/Food_and_Drinks/Restaurants/how_many_restaurants_are_in_america http://answers.ask.com/Food_and_Drinks/Restaurants/how_many_... 4) Restaurants, spas, and other retail vendors have fixed (and perishable costs). This means that at particular times they can offer incredible deals as the alternative is burned or thrown out resources. Groupon's team has indicated their #1 mission moving forward is to figure out this perishability equation. Their VP says “If we can eliminate 10 percent of perishability, we can change the dynamics for small business owners,” he says. Small businesses would become more like airlines, matching supply against demand to maximize revenues." http://moneyland.time.com/2011/03/18/impulse-shopping-2-0-groupons-new-deals-tempt-anyone-whos-hungry-or-bored-right-now/#ixzz1OFeK6lY0 http://moneyland.time.com/2011/03/18/impulse-shopping-2-0-gr...
- anigbrowl 15y ago
  #4 is a viable point, but the problem for Groupon in trying to capitalize on reducing this wastage is that the demand for such services is highly elastic. To a large extent the problem here is a time-of-day issue that Groupon can't particulary assist with. Sure, a restaurant is burning valuable energy outside of lunch and dinner hours, but if such a business owner wants to give a discount during certain hours why use Groupon? That's what 'happy hour' is for, and merchants have a pretty good idea how far they can go with price discrimination without alienating their busy-time customers. Also: http://xkcd.com/951/ http://xkcd.com/951/
  - abbasmehdi 15y ago
    I beg to differ, a time-stipulation could be incorporated in said coupons which could be automatically refunded if unused.
twakefield 15y ago
"All of this raises an obvious question: How did so many Wall Street firms desperate to underwrite the Groupon I.P.O. miss these warning signs when pitching such a sky-high valuation?" Come. On. Is it really necessary to ask questions like these about the motivation of Wall Street firms? They didn't miss it. They saw a trend that they thought they could exploit, namely, the growing tech bubble and its darling that they could flip (along with an eight figure underwriting fee). Although, I am surprised they didn't manage the process (and Mr. Mason) better. They let it get away from them, which is not like Goldman Sachs.
- dredmorbius 15y ago
  OccupyThisPost. Truth.
- seven_stones 15y ago
  http://www.crunchbase.com/company/groupon http://www.crunchbase.com/company/groupon Funding Total $1.14B Series D, 1/11 $950M Digital Sky Technologies Morgan Stanley Venture Partners Fidelity Ventures Andreessen Horowitz Battery Ventures Greylock Partners Kleiner Perkins Caufield & Byers Maverick Capital Silver Lake Partners Technology Crossover Ventures The only thing more ridiculous is Twitter. Funding Total $1.16B How much hardware would it take to clone Twitter, if done efficiently? A year ago they were at 1,000 tweets per second and 12,000 queries per second. http://engineering.twitter.com/2010/10/twitters-new-search-architecture.html http://engineering.twitter.com/2010/10/twitters-new-search-a... The Steve Jobs news set a new record of 10,000 TPS. TPS Report: http://techland.time.com/2011/10/07/twitter-breaks-tweets-per-second-record-in-response-to-steve-jobs-death/ http://techland.time.com/2011/10/07/twitter-breaks-tweets-pe... As of 7 months ago, they were at a billion tweets per week: http://blog.twitter.com/2011/03/numbers.html http://blog.twitter.com/2011/03/numbers.html If the average message is half the maximum length, then that's around 70 gigs/week naïvely (not counting multibyte characters or metadata). Around 3.6 terabytes per year. Older tweets are probably almost never accessed so they can stay on mechanical HDs, and stuff that IS needed can get temporarily promoted to SSD storage which can handle all that random seeking. And older tweets can probably be nicely compressed. Search is the only real challenge, but they "solve" that by not indexing most tweets. A subset of recent tweets, not indexed in real time, pushing out older ones.
traveldotto1 15y ago
I am curious where is the Group in Groupon these days. Groupon is more like a coupon company now than the group buying phenomena that made it successful.
guelo 15y ago
Cooking the books before an IPO to hide an unsustainable ponzi sceme? Shouldn't someone be going to jail? At both Groupon and at Goldman.
revorad 15y ago
I find it strange that Groupon gets so much attention on HN. It's not a technology company. It's a marketing/advertising company with seriously questionable ways of doing things. Andrew Mason is a cool guy and I loved his talk at Startup School last year, but his company is more into financial engineering than innovation, just like Wall street and the banks.
moomin 15y ago
I think all of the people who just didn't "get it", did the boring thing, actually read the IPO and then started throwing around inflammatory words like 'Ponzi'... ...are feeling pretty smart right now.
mrkmcknz 15y ago
I personally (if I could afford to) would buy as many put options that my broker would allow on this stock on day one.
vsl2 15y ago
I don't see how Groupon is anything more than a huge bubble waiting to burst. They may be worth something, but nothing even close to the valuation that Groupon/bankers are trying to create with accounting tricks. From a merchant perspective, I don't see how using Groupon helps long-term profitability. Almost everyone I know who use Groupon regularly only visit the participating merchants when using a Groupon and never again. Furthermore, they are reluctant to pay full price at any merchant if they know that that that merchant has previously had a Groupon promotion. So the merchant not only effectively spends marketing $$$ (since Groupon is supposed to be considered a marketing expense) for customers that will only use the loss-producing (likely) coupon, the merchant also devalues itself in people's (including those that did not previously use a Groupon) eyes. Additionally, the daily deal industry itself doesn't have strong reasons to remain tied to a company (unlike social networking where people tend to stay where their friends are) and there are very low barriers to entry. Granted, if you're the biggest player in the market, you have certain advantages like economies of scale, brand recognition, but I don't know if that is sufficient to thrive in this industry where people jump from site to site depending on which site has the best deals for that day. Add in pre-IPO accounting tricks and early cash-out (while the company is running hundreds of millions in the red)...well, you get the point.

105 points by OstiaAntica 15y ago

Who missed these red flags? Nobody I know in the valley. We've all been mocking @Groupon as an un-defensible and unsustainable ponzi scheme. For at least a year and a half there have been enough major news organizations backing this sentiment. Come on. Online coupons. Groupon is the hype of boo.com, webvan, and Kozmo.com all rolled into one, with greedy investors hoping they can make a quick buck before people realized what happened. Groupon is a glorified wordpress blog with 10,000 sales reps propping up the fake market with unsustainable or warranted demand. It's like watching Boiler Room play out in real life. There is no business process innovation here or technical innovation. The only innovation here is using huge marketing dollars to perpetuate a pump and dump ponzi scheme long enough for an IPO. Oh wait, that's not innovative, they did the same thing with dozens of companies a decade ago just before the first web bubble burst.

pitdesi 15y ago
I am not at all a Groupon apologist (I think their base business is declining and doesn't make sense for most local businesses in the long-term), but you have gone way overboard by comparing Groupon to boo, webvan, and kozmo. For all its faults, Groupon is on track for $1.5Bn in NET revenues (this doesn't include pass-through that they initially included in revenues) this year, and will probably still IPO somewhere around 10 billion dollars. All of the companies you mentioned only existed for 2 years before being liquidated. As for everyone in the valley knowing Groupon was a ponzi scheme for the past year and a half - then the folks from Battery, Accel, Kleiner Perkins, Greylock, NEA, TCV, Silver Lake, etc (all of whom made investments in Groupon this year) would have to be complete idiots to invest in Groupon, and that is certainly not true. Sidenote- a quick reminder on what it was like in the 00 bubble that you reference: http://feefighters.com/blog/ff_infographic/tech-boom-or-bubble-lets-look-at-the-data/ http://feefighters.com/blog/ff_infographic/tech-boom-or-bubb...
- Retric 15y ago
  You can call a loan Revenue that does not make it so. And when you need advertizing to sustain your business you don't get to call it revenue neutral, it's still just another expense. June 2nd, 2011 "Groupon lost $456 million last year, and another $147 million last quarter." http://techcrunch.com/2011/06/02/groupon-growth-2-6-billion-revenue-run-rate-charts/ http://techcrunch.com/2011/06/02/groupon-growth-2-6-billion-... PS: The #1 investing rule is the second a company starts playing games with their books avoid them.
  - pbreit 15y ago
    Much of business consists of selling product before paying vendors. Have you heard of "Net 30/60/90" terms? The advertising is to acquire customers. But then it can obviously promote deals to existing customers for essentially no cost. This is also the reason it wasn't crazy to consider the mailing list an asset and account for it accordingly. Progress is only made when someone pushes.
    - anigbrowl 15y ago
      What, they are going to lay off their massive sales staff and the vendors are going to keep coming back to offer zero-margin daily deals because...? This company doesn't have a USP; its business model is being cloned left and right, and customers have zero brand loyalty to the coupon broker. I can't understand your unshakeable faith in it. Your pricetack.com project looks vastly more interesting to me than Groupon ever has.
      - goodweeds 15y ago
        Even then, Groupon was basically a modified rip-off of Woot.com and other deals sites. Bernie Madoff would be proud of Groupon.
- byoung2 15y ago
  but you have gone way overboard by comparing Groupon to boo, webvan, and kozmo. At least those companies had tangible assets to liquidate (boo had inventory, webvan had a distribution network, and Kozmo had a stash of DVD's). Groupon has posted impressive revenue numbers (but still no profit) using an unsustainable model of aggressive spending on advertising and sales team headcount. With growth slowing, increasing backlash from merchants, and questions about their accounting methods, Groupon is on the decline. Maybe TheGlobe.com (http://en.wikipedia.org/wiki/TheGlobe.com http://en.wikipedia.org/wiki/TheGlobe.com) is a more fitting comparison.
hkmurakami 15y ago
> Who missed these red flags? Nobody I know in the valley. I'm sure Average Joe America drank the proverbial Cool Aid with respect to Groupon. We must remember that the vast majority of America doesn't care to do critical analysis of yet another hot internet startup; they're going to believe what's fed to them. Average America is not the Valley. It's good that non Hacker News / Quora media resources are publicly criticizing Groupon now. I was terribly worried that the uninformed Mom and Pop investors would get caught up in the Groupon Ponzi scheme when they would IPO. For now, it seems that the likelihood and magnitude of this happening are much lower now.
unreal37 15y ago
Exactly my reaction. Even reading only the headline, "The Missed Red Flags of Groupon", my first reaction was "who missed them?" From the owners taking 90% of the investors money for themselves, the fact their advertising costs almost match their sales, the fact that they make $270 million Q1'11 and still managed to lose $140 million... it all smells. Groupon is a Ponzi scheme, and all the so-called smart investors and underwriters are just hoping to cash out before the pyramid collapses. There is nobody who seriously things this is a real long term sustainable business is there? Can't be.
- fennecfoxen 15y ago
  Yeah - Groupon seems like it could be a semi-reasonable business, if they can get their customer-acquisition costs under control, but the sky-high valuations (Google's $3 billion and up) are completely ridiculous and buying Groupon's stock is a losing game at this point.
gojomo 15y ago
I think Groupon's model preys on small businesses unskilled in accrual accounting and pricing strategy. Also, both my readings and personal interactions have given me the impression that in their hyper-growth they have become a deeply dishonest organization. All that said, however, there are still some interesting non-predatory wrinkles in their model. The single deal at a time served to create consumer focus. The trigger threshold gave merchants confidence a deal would have a certain minimum impact. The time limit and trigger threshold served as an especially powerful call-to-action: now or never. Though Groupon quickly tuned things (and grew) such that every deal was essentially guaranteed to 'tip', the group-threshold-mechanics were important for accelerating early adoption, overcoming vendor- and consumer- resistance to coordinated action. This mechanism, rooted in economics and game theory and related to the 'assurance contact' concept, still has utility for other endeavors, among them Kickstarter, even if that mechanic standing alone does not provide any sort of defensible advantage. By all means, throw out the baby. But don't forget there's still something interesting in that bathwater.
- fennecfoxen 15y ago
  Oh, sure, there's something in that bathwater... it's just not worth $30 billion. Not even close.
sliverstorm 15y ago
Who missed these red flags? Nobody I know in the valley It is true 'the valley' would seem to have caught on, but don't forget the sizeable period of time when Groupon was the darling of this very website. If memory serves, HN opinion of Groupon didn't start to tank until the founders sold a big chunk of their shares, whenever that was. I'm pretty sure when the Google offer/rumor was afloat, everyone at HN applauded Groupon for rejecting.
- veyron 15y ago
  Prima facie, there's no reason to believe that groupon was unprofitable. And since there's no legal obligation to release their financials, we were left to trust Groupon's numbers. That being said, the amount of money taken off the table was the first real warning sign.

Gaussian 15y ago

Sure. Groupon has a few problems. But the idea that an underwriting firm such as Goldman or Morgan is some kind of arbiter of wholesome business fundamentals is ridiculous. Sorkin knows better than to suggest that.

untangle 15y ago

"[we are]...not one of those uglies." (CEO using sonogram analogy in memo to employees.) This is the $310M man? Are you kidding me? Next he'll be off killing elephants with the GoDaddy guy. Bob

malbs 15y ago
The "one of those uglies" quote is from the CEO, Andrew Mason. The guy who took $319 million was Eric Lefkofsky (Groupon chairman). Nice pay day.

tomasienrbc 15y ago

All it took for me was for their revenue model to be revealed. Discounts of 50-90% THEN they take 50-90% of what is paid by the customer? Borderline robbery.

startupstella 15y ago
It depends on how the merchant treats a Groupon customer. They may make up for the customer acquisition cost by offering less (hurtful to them) discounts in the future. Take this spa for example, they did a follow up for Groupon customers offering the same 50% deal, but this time they kept Groupon's share: http://feefighters.com/blog/who-groupon-benefits-the-contractor-vs-the-business/ http://feefighters.com/blog/who-groupon-benefits-the-contrac...
- tomasienrbc 15y ago
  And I think we can all agree that hurts Groupon in the longterm. So.... doesn't seem like it depends at all, regardless people are trying to avoid using Groupon.

tomasienrbc 15y ago

We haven't even SEEN the local merchants bail on Groupon yet, and that is going to happen. Believe me. I deal with disenfranchised Groupon merchants everyday, and they almost all hate it. The craziest part is they're all considering doing it AGAIN just because they feel blackmailed into it by the "if I don't do it, my neighbor will. At least this way I might get something out of it" situation. I love selling an alternative, because it sells itself. You're NOT like Groupon? SOLD!

Fliko 15y ago

Hindsight bias is probably the most important 2 words here.

aresant 15y ago

Groupon is a huge, fun target but there are compelling fundamentals under all the noise and pre-IPO PR blunders: 1) "66% of Groupon deals are profitable for the seller, and 40% of businesses would not use Groupon again, according to a Rice University study." http://www.quora.com/Groupon-IPO-S-1-Filing-June-2011/What-is-Groupons-redemption-rate http://www.quora.com/Groupon-IPO-S-1-Filing-June-2011/What-i... 2) Groupon has a hidden vat of PURE margin - breakage / un-redeemed deals that could be a shocking amount of money once financials are disclosed. 3) They have enormous growth potential in key markets which is why they are spending money like drunken sailors on customer acquisition. They can grow by 10x in the restaurant space alone. http://answers.ask.com/Food_and_Drinks/Restaurants/how_many_restaurants_are_in_america http://answers.ask.com/Food_and_Drinks/Restaurants/how_many_... 4) Restaurants, spas, and other retail vendors have fixed (and perishable costs). This means that at particular times they can offer incredible deals as the alternative is burned or thrown out resources. Groupon's team has indicated their #1 mission moving forward is to figure out this perishability equation. Their VP says “If we can eliminate 10 percent of perishability, we can change the dynamics for small business owners,” he says. Small businesses would become more like airlines, matching supply against demand to maximize revenues." http://moneyland.time.com/2011/03/18/impulse-shopping-2-0-groupons-new-deals-tempt-anyone-whos-hungry-or-bored-right-now/#ixzz1OFeK6lY0 http://moneyland.time.com/2011/03/18/impulse-shopping-2-0-gr...

anigbrowl 15y ago
#4 is a viable point, but the problem for Groupon in trying to capitalize on reducing this wastage is that the demand for such services is highly elastic. To a large extent the problem here is a time-of-day issue that Groupon can't particulary assist with. Sure, a restaurant is burning valuable energy outside of lunch and dinner hours, but if such a business owner wants to give a discount during certain hours why use Groupon? That's what 'happy hour' is for, and merchants have a pretty good idea how far they can go with price discrimination without alienating their busy-time customers. Also: http://xkcd.com/951/ http://xkcd.com/951/
- abbasmehdi 15y ago
  I beg to differ, a time-stipulation could be incorporated in said coupons which could be automatically refunded if unused.

twakefield 15y ago

"All of this raises an obvious question: How did so many Wall Street firms desperate to underwrite the Groupon I.P.O. miss these warning signs when pitching such a sky-high valuation?" Come. On. Is it really necessary to ask questions like these about the motivation of Wall Street firms? They didn't miss it. They saw a trend that they thought they could exploit, namely, the growing tech bubble and its darling that they could flip (along with an eight figure underwriting fee). Although, I am surprised they didn't manage the process (and Mr. Mason) better. They let it get away from them, which is not like Goldman Sachs.

dredmorbius 15y ago
OccupyThisPost. Truth.
seven_stones 15y ago
http://www.crunchbase.com/company/groupon http://www.crunchbase.com/company/groupon Funding Total $1.14B Series D, 1/11 $950M Digital Sky Technologies Morgan Stanley Venture Partners Fidelity Ventures Andreessen Horowitz Battery Ventures Greylock Partners Kleiner Perkins Caufield & Byers Maverick Capital Silver Lake Partners Technology Crossover Ventures The only thing more ridiculous is Twitter. Funding Total $1.16B How much hardware would it take to clone Twitter, if done efficiently? A year ago they were at 1,000 tweets per second and 12,000 queries per second. http://engineering.twitter.com/2010/10/twitters-new-search-architecture.html http://engineering.twitter.com/2010/10/twitters-new-search-a... The Steve Jobs news set a new record of 10,000 TPS. TPS Report: http://techland.time.com/2011/10/07/twitter-breaks-tweets-per-second-record-in-response-to-steve-jobs-death/ http://techland.time.com/2011/10/07/twitter-breaks-tweets-pe... As of 7 months ago, they were at a billion tweets per week: http://blog.twitter.com/2011/03/numbers.html http://blog.twitter.com/2011/03/numbers.html If the average message is half the maximum length, then that's around 70 gigs/week naïvely (not counting multibyte characters or metadata). Around 3.6 terabytes per year. Older tweets are probably almost never accessed so they can stay on mechanical HDs, and stuff that IS needed can get temporarily promoted to SSD storage which can handle all that random seeking. And older tweets can probably be nicely compressed. Search is the only real challenge, but they "solve" that by not indexing most tweets. A subset of recent tweets, not indexed in real time, pushing out older ones.

traveldotto1 15y ago

I am curious where is the Group in Groupon these days. Groupon is more like a coupon company now than the group buying phenomena that made it successful.

guelo 15y ago

Cooking the books before an IPO to hide an unsustainable ponzi sceme? Shouldn't someone be going to jail? At both Groupon and at Goldman.

revorad 15y ago

I find it strange that Groupon gets so much attention on HN. It's not a technology company. It's a marketing/advertising company with seriously questionable ways of doing things. Andrew Mason is a cool guy and I loved his talk at Startup School last year, but his company is more into financial engineering than innovation, just like Wall street and the banks.

moomin 15y ago

I think all of the people who just didn't "get it", did the boring thing, actually read the IPO and then started throwing around inflammatory words like 'Ponzi'... ...are feeling pretty smart right now.

mrkmcknz 15y ago

I personally (if I could afford to) would buy as many put options that my broker would allow on this stock on day one.

vsl2 15y ago

I don't see how Groupon is anything more than a huge bubble waiting to burst. They may be worth something, but nothing even close to the valuation that Groupon/bankers are trying to create with accounting tricks. From a merchant perspective, I don't see how using Groupon helps long-term profitability. Almost everyone I know who use Groupon regularly only visit the participating merchants when using a Groupon and never again. Furthermore, they are reluctant to pay full price at any merchant if they know that that that merchant has previously had a Groupon promotion. So the merchant not only effectively spends marketing $$$ (since Groupon is supposed to be considered a marketing expense) for customers that will only use the loss-producing (likely) coupon, the merchant also devalues itself in people's (including those that did not previously use a Groupon) eyes. Additionally, the daily deal industry itself doesn't have strong reasons to remain tied to a company (unlike social networking where people tend to stay where their friends are) and there are very low barriers to entry. Granted, if you're the biggest player in the market, you have certain advantages like economies of scale, brand recognition, but I don't know if that is sufficient to thrive in this industry where people jump from site to site depending on which site has the best deals for that day. Add in pre-IPO accounting tricks and early cash-out (while the company is running hundreds of millions in the red)...well, you get the point.