Groupon is Effectively Insolvent • Hacker News Board

Re: Groupon is Effectively Insolvent

#21

Post by jasonlotito » Fri, Jun 03, 2011, 5:02 PM UTC

raganwald wrote: post #15

tzs wrote: post #12

Earlier quoted context omitted.

In case anyone is curious, the design aspect of the site that pissed me off is that it blocks resizing the text. I found it too small to comfortably read, and hitting my browser's "make bigger" button just makes all the other elements on the page bigger, not the text.

it blocks resizing the text Bad, very bad. Don't do this, ever. You don't know what my monitor's resolution is. You don't know if I have left my glasses in the car and need to make the text huge to read what you have to say. You don't know if I have my glasses but I'm reading your words on my television across the room. You don't know if I'm using a tablet or phone and I need to pinch and zoom to navigate. Set a defa…

Use a browser that lets you resize text? Before you say anything, I already know. I just think this is a problem with the browser, not with a site. The browser should be able to resize the text. If it can't, it's a browser failure.

Re: Groupon is Effectively Insolvent

#22

Post by code_duck » Fri, Jun 03, 2011, 5:02 PM UTC

So, after they stop investing in expansion and reach a stable level, what is the realistic value of Groupon? Or does nobody really know enough to speculate?

Re: Groupon is Effectively Insolvent

#23

Post by bcrescimanno » Fri, Jun 03, 2011, 5:07 PM UTC

3am wrote: post #18

wccrawford wrote: post #2

They're trading that temporary debt for hypergrowth, as the article says. "For the remainder of the year they had $669 million in revenue (simply staggering), but had a net loss attributable to Groupon of $398 million. This year, Q1 results showed revenue growth continuing to soar, with revenues of $644 million, but a net loss attributable to Groupon of $102 million." So the time periods were different, but the reven…

I'm glad you said this. I gave up on a reply yesterday to the initial story for lack of time, but basically it said "anyone that thinks that Groupon is like a Ponzi scheme doesn't understand how a Ponzi scheme works". You can say all you want about their lack of differentiation from competitors, there huge debt levels, their dicey use of the series G funding, and what appears to be a poorly scaling business model. Yo…

I disagree. The heart of a ponzi scheme is continually securing new investments to pay out earlier investors--which is exactly how Groupon has operated up to this point. They're not alone in this concept; it's becoming increasingly common in the tech industry.

The only argument to say that they're not a ponzi scheme is that there's actually a legitimate business with revenue associated with it. It's a somewhat compelling argument--but I'd personally contend that the business, in this case, has really been nothing more than a front for the scheme (at least, historically speaking--though unlikely, Groupon may yet prove out to become a profitable business). No one has made a dime of profit off of the business that is Groupon--yet several early investors and the founder have made an absolute killing based on the "ponzi" side of things.

Dress it up however you want, people have made money hand-over-fist operating a de facto ponzi scheme; having a "real" business along with it has shielded them from the ire of the law.

Re: Groupon is Effectively Insolvent

#24

Post by whakojacko » Fri, Jun 03, 2011, 5:07 PM UTC

sili wrote: post #14

chailatte wrote: post #3

I doubt Groupon will bankrupt any of hacker news readers' portfolio; I bet most of them are licking their chops to short this thing (just like they are shorting LinkedIn). Effectively, all these IPO/overvaluation bubbles are meant to steal from (mostly public) pensions of older investors. So the next time you see your uncle or grandpa, buy them a nice bottle of wine! They're paying for your startup (while losing thei…

Although I'm not investing directly, my concern is what the fund manager in charge of my 401k thinks of this.

If you have that concern, you probably aren't investing in the right mutual funds. Almost all 401(k)s have a very low cost index fund that will mirror the s&p 500.

Re: Groupon is Effectively Insolvent

#25

Post by senorprogrammer » Fri, Jun 03, 2011, 5:09 PM UTC

jeffdavis wrote: post #17

wccrawford wrote: post #2

They're trading that temporary debt for hypergrowth, as the article says. "For the remainder of the year they had $669 million in revenue (simply staggering), but had a net loss attributable to Groupon of $398 million. This year, Q1 results showed revenue growth continuing to soar, with revenues of $644 million, but a net loss attributable to Groupon of $102 million." So the time periods were different, but the reven…

"Ponzi relied on lying to the investors and telling them the money came from good investments." It seems like a more crucial aspect of a Ponzi scheme is that you tell new investors that their money will go into the business, when in reality it's just paying old investors. So, did the investors who put in a billion dollars realize that most of it was going to old investors?

I think it's generally accepted that yes, they knew where their investment was going. It would have been incumbent on an IPO, in which scenario they then hand off their stake in the company to the public with the expectation of making first-day LinkedIn profits.

If Groupon does go through with its IPO, expect those new investors to dump hard on day 1.

Re: Groupon is Effectively Insolvent

#26

Post by wccrawford » Fri, Jun 03, 2011, 5:14 PM UTC

SwellJoe wrote: post #7

wccrawford wrote: post #2

They're trading that temporary debt for hypergrowth, as the article says. "For the remainder of the year they had $669 million in revenue (simply staggering), but had a net loss attributable to Groupon of $398 million. This year, Q1 results showed revenue growth continuing to soar, with revenues of $644 million, but a net loss attributable to Groupon of $102 million." So the time periods were different, but the reven…

Groupon is sustainable I'm curious what you base this assertion on?

Based on the numbers provided. While they were doing their 'hypergrowth', they managed to improve their income/expense ratio. That's pretty impressive to me. When they stop spending so much money on growing, it should be easy to show a profit.

Re: Groupon is Effectively Insolvent

#27

Post by 3am » Fri, Jun 03, 2011, 5:17 PM UTC

bcrescimanno wrote: post #23

3am wrote: post #18

Earlier quoted context omitted.

I'm glad you said this. I gave up on a reply yesterday to the initial story for lack of time, but basically it said "anyone that thinks that Groupon is like a Ponzi scheme doesn't understand how a Ponzi scheme works". You can say all you want about their lack of differentiation from competitors, there huge debt levels, their dicey use of the series G funding, and what appears to be a poorly scaling business model. Yo…

I disagree. The heart of a ponzi scheme is continually securing new investments to pay out earlier investors--which is exactly how Groupon has operated up to this point. They're not alone in this concept; it's becoming increasingly common in the tech industry. The only argument to say that they're not a ponzi scheme is that there's actually a legitimate business with revenue associated with it. It's a somewhat compel…

"The only argument to say that they're not a ponzi scheme is that there's actually a legitimate business with revenue associated with it."

That isn't a minor point. There is a big different between stupid investors with full information and a Ponzi scheme. It is not an abstract argument. The first is common, the second will land you in prison.

Re: Groupon is Effectively Insolvent

#28

Post by kno » Fri, Jun 03, 2011, 5:20 PM UTC

tzs wrote: post #4

To save people having to fight with that sites asshole design, here's the text: I'll start by tipping my hat to Andrew Mason. He caught social mood just right, creating a coupon/local/flashmob hybrid business model at the perfect time, and has created the fastest-growing company on a revenue basis in American history. That being said, it's operating like a Ponzi scheme that needs constant infusions of cash to stay af…

Can anyone explain how these guys spend money on the business, how can cost of running Groupon be so high?

Re: Groupon is Effectively Insolvent

#29

Post by bcrescimanno » Fri, Jun 03, 2011, 5:22 PM UTC

3am wrote: post #27

bcrescimanno wrote: post #23

Earlier quoted context omitted.

I disagree. The heart of a ponzi scheme is continually securing new investments to pay out earlier investors--which is exactly how Groupon has operated up to this point. They're not alone in this concept; it's becoming increasingly common in the tech industry. The only argument to say that they're not a ponzi scheme is that there's actually a legitimate business with revenue associated with it. It's a somewhat compel…

"The only argument to say that they're not a ponzi scheme is that there's actually a legitimate business with revenue associated with it." That isn't a minor point. There is a big different between stupid investors with full information and a Ponzi scheme. It is not an abstract argument. The first is common, the second will land you in prison.

If the purpose of a business is to generate profit for its owners (investors), then the only business Groupon has successfully operated to this point has been a ponzi scheme.

Just because it's common doesn't mean it's not a ponzi scheme. It's just a ponzi scheme in a pretty dress. I'd be willing to go further and say it's just as bad because if you read their S1 and their made up accounting "principles," they're actually attempting to deliberately mislead people into thinking the business is in a much better state than it really is.

Again, it may be possible to transform Groupon into a legitimate business going forward; however, to this point, it's been anything but that.

Re: Groupon is Effectively Insolvent

#30

Post by timtadh » Fri, Jun 03, 2011, 5:23 PM UTC

tzs wrote: post #12

click170 wrote: post #6

Earlier quoted context omitted.

When I click the link all I get is "Error establishing database connection", so thanks for copy/pasting.

In case anyone is curious, the design aspect of the site that pissed me off is that it blocks resizing the text. I found it too small to comfortably read, and hitting my browser's "make bigger" button just makes all the other elements on the page bigger, not the text.

The text resizes in FF4. Do you know what causes the text not to resize in your browser? It seems weird to me that you can force a browser to disallow resizing an element.

Edit: Well now I get the Apache Tomcat default page so it may be impossible to answer this question.