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Groupon is Effectively Insolvent
31–40 of 113 posts
Re: Groupon is Effectively Insolvent
#32Earlier quoted context omitted.
Groupon is sustainable I'm curious what you base this assertion on?
I think it probably translates to "Groupon is sustainable relative to a Ponzi scheme", which, even as a big Groupon skeptic for a long time now, I wouldn't challenge. A Ponzi scheme has no business other than selling ahead; Groupon does have a model for revenue. It may not work, but it really isn't fair to call it a Ponzi scheme. Bad business maybe, but not a Ponzi scheme. Ponzi schemes really ought to be reserved fo…
A Ponzi scheme has no business other than selling ahead
Charles Ponzi arbitraged postage coupons (and resorted to selling ahead when that failed to turn profit). Strict application of your definition makes Ponzi's scheme not a Ponzi scheme.
Re: Groupon is Effectively Insolvent
#33They'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…
Personally I find the booking of the face value of their coupons kind of questionable or at least unsustainable. Yes it is revenue, but a typical "coupon" business would probably only count the fees received from merchants as top-line revenue (because the merchants would collect the money directly). So it makes the business look more viable than it really is. I can't see merchants continuing to accept that, and I bet…
This is an issue that doesn't seem to be getting much play in all of the discussion about Groupon's financials - for every $2 that comes in the door as revenue, $1 of that immediately is booked as a liability as well. I am far from an accountant or all that familiar with GAAP but it seems somewhat disingenuous.
Re: Groupon is Effectively Insolvent
#34To 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?
Primarily it's the salesforce and other employees from what I understand. 8000 employees x $40k/year average = $320 mil/year
Re: Groupon is Effectively Insolvent
#35Earlier 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 heart of a ponzi scheme is continually securing new investments to pay out earlier investors.
The difference is the nature of the deception. In a ponzi scheme, you accept an investment, buy yourself a new house, and then tell the investor they're earning 10%. You flat-out lie about what you did with the money, and year after year you you keep enough cash around to make incremental pay outs as necessary to maintain the illusion of a stable, well-performing portfolio.
It's 100% deception and the element of theft is obvious.
With GroupOn, the risks may be downplayed and the potential benefits exaggerated, but certainly right now no one should invest without understanding that investing means significant risk. Furthermore, it's been published what money has gone to cash out early investors, and what money has been invested into the company.
The ethics are definitely questionable, but then the ethics of a casino are questionable, too. The ethics of a ponzi scheme are not questionable-- it's straightforward lying and stealing.
Re: Groupon is Effectively Insolvent
#36They'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…
But if you take a look at their SEC filing, $203 million of their 2010 expenses were one-time acquisition related. So the operating loss isn't being reduced as quickly as one might think.
Other warning signs. Working capital deficit was larger at the end of Q1 '11 by about $32 million and free cash flow is going down.
Plus, since all the costs are sales & marketing related, they're not boxing anyone out by building large-scale infrastructure (Amazon, Google) or making customers sticky (Facebook).
I would hazard a guess because they own ad-delivery systems, Facebook or Google could reach the number of people Groupon reaches for a lot less marketing dollars.
Re: Groupon is Effectively Insolvent
#37To 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?
Staffing should be a huge component. Crunchbase[1] lists 3100 employees and yet there's 8000 now. Most of them probably inside sales. Spreading the word out and getting every brick and mortar to hear about and use them is critical now.
Re: Groupon is Effectively Insolvent
#38Earlier quoted context omitted.
Can anyone explain how these guys spend money on the business, how can cost of running Groupon be so high?
Primarily it's the salesforce and other employees from what I understand. 8000 employees x $40k/year average = $320 mil/year
The office must be a madhouse at the rate they're hiring.
Re: Groupon is Effectively Insolvent
#39To 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…
What is it with everything being described as a Ponzi scheme these days? Groupon, Bitcoin, Subprime MBSs, Social Security, etc.
Re: Groupon is Effectively Insolvent
#40Earlier 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.
That's similar to other problems I have with sites recently: their super-special javascript on textareas screws up my own resizing of them, and even worse, ruins ctrl/cmd Z! I don't know how they do it, but screwing up Undo is pretty serious.
This happens when you listen to and then improperly handle keyboard events.
Somebody probably just copied a script from w3schools and smashed their face into it for a few hours until it did some approximation of what they might have maybe wanted it to do.
Unfortunately, the buckshot approach to software development leaves a lot to be desired. Especially when you start with such a horrible original product as w3schools.