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Who would have imagined that groupon had a future? It worked on the novelty effect and it was doomed to fail. On the other hand, Chicago business is full of bu

Who would have imagined that groupon had a future? It worked on the novelty effect and it was doomed to fail. On the other hand, Chicago business is full of bugs. Ghostery block 13 (!) calls to different websites such as: Quantcast, 24/7 real media, Outbrain etc... I won't visit this website again. I wish I was warned of that before hand not when I go to the website, I value my privacy more than going there.

itsmequinn 15y ago
The writing was also poor. The second paragraph starts saying "The first two lawsuits were filed..." without having given any context either in the headline or the first paragraph. The HN headline was better than the one at the site itself.
dclowd9901 15y ago
In theory, every "bargain" mechanism is doomed to failure as companies learn how to game it, returns diminish, and consumers fall out of favor with it.
- pbhjpbhj 15y ago
  How do companies game Groupon standing at the checkout taking the customers money and giving the company 20% of the invoice amount?
zaidf 15y ago
It worked on the novelty effect and it was doomed to fail. A little premature to write an obituary of a company that finished 2011 with 1.6B in revenue.
- ceejayoz 15y ago
  Not if it's unlikely to turn that revenue into actual profits.
- unabridged 15y ago
  Not when that company's popularity has leveled off and still finished last year with a $370M loss. http://biz.yahoo.com/e/120330/grpn10-k.html http://biz.yahoo.com/e/120330/grpn10-k.html http://www.google.com/trends/?q=groupon&ctab=0&geo=all&date=all&sort=0 http://www.google.com/trends/?q=groupon&ctab=0&geo=a...
  - zaidf 15y ago
    Welcome to the stock market.
- ohashi 15y ago
  1.6B in revenue is pretty meaningless if you're not even making a profit. They are simply really good at losing a lot of money.
  - zaidf 15y ago
    It's "scary" and "even" dangerous one may say, but not meaningless.
    - ohashi 15y ago
      You are correct, it's not meaningless, I should have said: Simply having revenue isn't a defense for a company if they are spending more money than they are bringing in.
  - pbreit 15y ago
    Revenues are generally as important or more than profits for a company at Groupon's stage (ie, young, high growth). Since its primary expenses are sales and marketing, it's easy to envision how such a growth machine could become wildly profitable (hence the $9.4b market value).
    - ohashi 15y ago
      It seems like imagination is about all they are running on. I would accept the idea that growth could be more important for some companies at an early stage. However, I don't think it's applicable to groupon's situation.
      - zaidf 15y ago
        However, I don't think it's applicable to groupon's situation That is debatable. Consider this: Amazon started off just selling books, today they are gunning for Walmart. At the time, people raised similar objections and Amazon took heat for years for remaining unprofitable. No one is complaining today. Similarly, I see Groupon's deals business as just one product. There are signs from their recent aquisitions that they might diversify with new products targeted at the same small businesses(such as credit card processing). Now, just because it all ended well for Amazon doesn't mean the same will happen for Groupon. I am just pointing out that it is not a foreign strategy to prefer growth over profitability for many years after the IPO.
- JHSheridan 15y ago
  This argument always blows my mind. Who cares about revenue? Profit is what counts. If you make 10 trillion, but have to spend 10 trillion and 1, you're failing. Web-based companies have to make a profit too. Why do people forget this?
  - zaidf 15y ago
    Saying "who cares about revenue?" is just as faulty as stating "who cares about profit?"(which I never stated).
    - JHSheridan 15y ago
      Not following you here. Care to elaborate? I'd invest my money in a company who makes 200,000 in revenue with 100,000 in profits much faster than one who makes 200,000,000,000,000 in revenue with 0 in profits. To me, this seems so basic, and I'm certainly not very well versed in business. Am I missing something?
- rprasad 15y ago
  Part of Groupon's problem is that it did not actually book 1.6billion in revenue under generally accepted accounting principles (GAAP). It booked 1.6billion under Groupon's magical accounting practices (MAP). Under GAAP, money which is contractually owed to a third party at the time of collection is not booked as revenue. Under Groupon's accounting practices, it is. This allows them to inflate revenue while downstating their liabilities. This is why the SEC is investigating them for fraud.
  - pbreit 15y ago
    False. Groupon's 2011 GAAP revenues were $1.6b. The number you are referring to is "Gross Billings" which were $4b in 2011. http://www.sec.gov/Archives/edgar/data/1490281/000144530512000922/groupon10-k.htm http://www.sec.gov/Archives/edgar/data/1490281/0001445305120...
    - rprasad 15y ago
      Sorry, my point was that Google's revenue numbers were not prepared according to GAAP. The "Gross Billings" numbers include the total amount of deals "sold", including the merchants' portions. The smaller "revenues" number front-loads income that should be recorded over time i.e., by including items that should be recorded in reserves or liabilities until such items are resolved. For example, Groupon treats as revenue all of Groupon's theoretical portion of a sale, including any amounts that it knows will have to refund and amounts that it estimates that it will have to refund. However, such items are not revenue, either b/c Groupon knows it will be refunding such items (and thus has no claim to the money), or because it expects that it may have to. Such items are supposed to be tracked in a separate account. The separate account is balanced out by a reserve account (a liability) which is removed from the books when the risk of refund has passed.
      - pbreit 15y ago
        That's not really what you said previously. You wrote "money which is contractually owed to a third party at the time of collection is not booked as revenue. Under Groupon's accounting practices, it is" and made no mention of refunds. Further, Groupon actually does reduce revenues by the reserves held to cover refunds (hence the recent revenue reduction to account for higher than expected refunding). Further, the SEC hasn't actually kicked off a formal investigation and if it does, it will be for financial control and accounting deficiencies, not fraud.
- Uchikoma 15y ago
  If I give 1B to my friends company for a service, and he gives me 1B for a service I provide, do we both have 1B in revenue?
  - zaidf 15y ago
    Groupon didn't make its money by swapping money between a couple of friends. Making a bil in revenue by the way of your example versus Groupon's way have very different risks associated with it.
- StacyC 15y ago
  A little premature to write an obituary of a company that finished 2011 with 1.6B in revenue. Revenue != profit. You could generate a trillion in revenue. What's left after the bills are paid is what counts.
  - zaidf 15y ago
    Amazon was unprofitable for years after IPO. If your argument that profits right now are the only thing that matter, then you'd be hating on amazon for the same reason you're hating on groupon. And if Amazon listened to folks like you and went for immediate profitability, they'd likely not have the growth they did. The real argument anti-groupon folks should be making is that in the long term, they don't see profitability. Too much emphasis is being put on their present unprofitability.

itsmequinn 15y ago

The writing was also poor. The second paragraph starts saying "The first two lawsuits were filed..." without having given any context either in the headline or the first paragraph. The HN headline was better than the one at the site itself.

dclowd9901 15y ago

In theory, every "bargain" mechanism is doomed to failure as companies learn how to game it, returns diminish, and consumers fall out of favor with it.

pbhjpbhj 15y ago
How do companies game Groupon standing at the checkout taking the customers money and giving the company 20% of the invoice amount?

zaidf 15y ago

It worked on the novelty effect and it was doomed to fail. A little premature to write an obituary of a company that finished 2011 with 1.6B in revenue.

ceejayoz 15y ago
Not if it's unlikely to turn that revenue into actual profits.
unabridged 15y ago
Not when that company's popularity has leveled off and still finished last year with a $370M loss. http://biz.yahoo.com/e/120330/grpn10-k.html http://biz.yahoo.com/e/120330/grpn10-k.html http://www.google.com/trends/?q=groupon&ctab=0&geo=all&date=all&sort=0 http://www.google.com/trends/?q=groupon&ctab=0&geo=a...
- zaidf 15y ago
  Welcome to the stock market.
ohashi 15y ago
1.6B in revenue is pretty meaningless if you're not even making a profit. They are simply really good at losing a lot of money.
- zaidf 15y ago
  It's "scary" and "even" dangerous one may say, but not meaningless.
  - ohashi 15y ago
    You are correct, it's not meaningless, I should have said: Simply having revenue isn't a defense for a company if they are spending more money than they are bringing in.
- pbreit 15y ago
  Revenues are generally as important or more than profits for a company at Groupon's stage (ie, young, high growth). Since its primary expenses are sales and marketing, it's easy to envision how such a growth machine could become wildly profitable (hence the $9.4b market value).
  - ohashi 15y ago
    It seems like imagination is about all they are running on. I would accept the idea that growth could be more important for some companies at an early stage. However, I don't think it's applicable to groupon's situation.
    - zaidf 15y ago
      However, I don't think it's applicable to groupon's situation That is debatable. Consider this: Amazon started off just selling books, today they are gunning for Walmart. At the time, people raised similar objections and Amazon took heat for years for remaining unprofitable. No one is complaining today. Similarly, I see Groupon's deals business as just one product. There are signs from their recent aquisitions that they might diversify with new products targeted at the same small businesses(such as credit card processing). Now, just because it all ended well for Amazon doesn't mean the same will happen for Groupon. I am just pointing out that it is not a foreign strategy to prefer growth over profitability for many years after the IPO.
JHSheridan 15y ago
This argument always blows my mind. Who cares about revenue? Profit is what counts. If you make 10 trillion, but have to spend 10 trillion and 1, you're failing. Web-based companies have to make a profit too. Why do people forget this?
- zaidf 15y ago
  Saying "who cares about revenue?" is just as faulty as stating "who cares about profit?"(which I never stated).
  - JHSheridan 15y ago
    Not following you here. Care to elaborate? I'd invest my money in a company who makes 200,000 in revenue with 100,000 in profits much faster than one who makes 200,000,000,000,000 in revenue with 0 in profits. To me, this seems so basic, and I'm certainly not very well versed in business. Am I missing something?
rprasad 15y ago
Part of Groupon's problem is that it did not actually book 1.6billion in revenue under generally accepted accounting principles (GAAP). It booked 1.6billion under Groupon's magical accounting practices (MAP). Under GAAP, money which is contractually owed to a third party at the time of collection is not booked as revenue. Under Groupon's accounting practices, it is. This allows them to inflate revenue while downstating their liabilities. This is why the SEC is investigating them for fraud.
- pbreit 15y ago
  False. Groupon's 2011 GAAP revenues were $1.6b. The number you are referring to is "Gross Billings" which were $4b in 2011. http://www.sec.gov/Archives/edgar/data/1490281/000144530512000922/groupon10-k.htm http://www.sec.gov/Archives/edgar/data/1490281/0001445305120...
  - rprasad 15y ago
    Sorry, my point was that Google's revenue numbers were not prepared according to GAAP. The "Gross Billings" numbers include the total amount of deals "sold", including the merchants' portions. The smaller "revenues" number front-loads income that should be recorded over time i.e., by including items that should be recorded in reserves or liabilities until such items are resolved. For example, Groupon treats as revenue all of Groupon's theoretical portion of a sale, including any amounts that it knows will have to refund and amounts that it estimates that it will have to refund. However, such items are not revenue, either b/c Groupon knows it will be refunding such items (and thus has no claim to the money), or because it expects that it may have to. Such items are supposed to be tracked in a separate account. The separate account is balanced out by a reserve account (a liability) which is removed from the books when the risk of refund has passed.
    - pbreit 15y ago
      That's not really what you said previously. You wrote "money which is contractually owed to a third party at the time of collection is not booked as revenue. Under Groupon's accounting practices, it is" and made no mention of refunds. Further, Groupon actually does reduce revenues by the reserves held to cover refunds (hence the recent revenue reduction to account for higher than expected refunding). Further, the SEC hasn't actually kicked off a formal investigation and if it does, it will be for financial control and accounting deficiencies, not fraud.
Uchikoma 15y ago
If I give 1B to my friends company for a service, and he gives me 1B for a service I provide, do we both have 1B in revenue?
- zaidf 15y ago
  Groupon didn't make its money by swapping money between a couple of friends. Making a bil in revenue by the way of your example versus Groupon's way have very different risks associated with it.
StacyC 15y ago
A little premature to write an obituary of a company that finished 2011 with 1.6B in revenue. Revenue != profit. You could generate a trillion in revenue. What's left after the bills are paid is what counts.
- zaidf 15y ago
  Amazon was unprofitable for years after IPO. If your argument that profits right now are the only thing that matter, then you'd be hating on amazon for the same reason you're hating on groupon. And if Amazon listened to folks like you and went for immediate profitability, they'd likely not have the growth they did. The real argument anti-groupon folks should be making is that in the long term, they don't see profitability. Too much emphasis is being put on their present unprofitability.