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Groupon is Effectively Insolvent

m.minyanville.com

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Re: Groupon is Effectively Insolvent

#61

Post by cosgroveb »

jasonlotito wrote: post #59
cosgroveb wrote: post #41

Earlier quoted context omitted.

Shoot. I downvoted you jason, sorry. I looked at the site's CSS and I think the problem we're experiencing is due to this site using -webkit-text-size-adjust: none; The text does not grow in size at all in Chrome for me (while the other page elements do... the text gets squished which gives it some illusion of growing). I tested it in Firefox 4 and increasing the font size works fine... So, I know you've been downvot…

It's okay. Technically, this thread about resizing text is off topic. =) And, as I mentioned: Yes, I know about the CSS problems that prevent text resizing. I've just always thought it should be considered a browser bug if it doesn't work. After all, if the UI gives you the option to increase the size of the text, it should increase the size of the text regardless of the CSS on the page.

I opened a bug with Chromium if you feel like starring it :)

http://code.google.com/p/chromium/issues/detail?id=84888

It will probably get marked Wontfix but hey I tried!

Re: Groupon is Effectively Insolvent

#62

Post by m311ton »

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…

Doesn't this all fit into the category of a leveraged buyout?

Re: Groupon is Effectively Insolvent

#63

Post by georgemcbay »

Macsenour wrote: post #47

Don't roll your eyes, but this is exactly what Reagan did to the Russians. Basically, spend more and faster than the other guy until he cries uncle. Groupon is raising money, spending like crazy to be the top dog. When the other "coupon" companies can't keep up, Groupon will buy them, retaining their #1 position. Once all of the others are gone or reduced to a tiny size, they'll go back to a sustainable model. This e…

"Don't roll your eyes, but this is exactly what Reagan did to the Russians. Basically, spend more and faster than the other guy until he cries uncle."

Has that really worked out for us so well over the long term? Certainly we can't pin our all of our current economic issues on Reagan as we've done a lot of spending and borrowing long after he left office, but once you get the snowball rolling down the hill very fast it becomes increasingly difficult to slow it down or stop it even after it has served whatever its original purpose was.

Re: Groupon is Effectively Insolvent

#64

Post by natrius »

Apocryphon wrote: post #53
narrator wrote: post #39

Earlier quoted context omitted.

What is it with everything being described as a Ponzi scheme these days? Groupon, Bitcoin, Subprime MBSs, Social Security, etc.

The 2000s really did teach us that anything related to economics is a Ponzi scheme. Hell, does the federal budget qualify as a Ponzi scheme?

A large portion of the federal budget consists of transfer payments from today's working population to retirees, with the expectation that tomorrow's working population will make similar transfer payments to today's.

Re: Groupon is Effectively Insolvent

#65

Post by snorkel »

Macsenour wrote: post #47

Don't roll your eyes, but this is exactly what Reagan did to the Russians. Basically, spend more and faster than the other guy until he cries uncle. Groupon is raising money, spending like crazy to be the top dog. When the other "coupon" companies can't keep up, Groupon will buy them, retaining their #1 position. Once all of the others are gone or reduced to a tiny size, they'll go back to a sustainable model. This e…

The hypergrowth strategy worked well for pets.com and webvan. What could go wrong?

Re: Groupon is Effectively Insolvent

#66

Post by Cherian_Abraham »

jpadvo wrote: post #55
Cherian_Abraham wrote: post #5

I found this link ( http://allthingsd.com/20110602/where-did-groupons-billion-do... ) to be a scathing indictment of Groupon, to the level where it could attract the label "Ponzi Scheme" or the less harsh "Very bad Investment choice". Seeing that the lion share of the two recent funding rounds were used to pay back investors, leaving very little on the table to fund their growh (this is when they are bleeding over 10…

This was a purchase: the investors bought part of the company. When they signed over a billion dollars, they were not trying to fund operations; they wanted to become part owners. They know that the vast bulk of the money would go straight to earlier employees and investors. This was a risky investment, yes. But it is neither unbelievably stupid nor criminally insane to make a risky investment. High risk investments…

I cant agree with that. When I invest, I have some expectations as to how that money should be invested, and for a company that is in desperate need of cash inflow to sustain its growth, thats where it should go. Period. Not to the coffers of early investors and employees. No one has any problem with them cashing out a part of their equity. This however (almost 400 million went to an early investor couple!) was a careless and completely selfish act to line one's pockets.

And now, they are ready for the next round, and only this time, its the public who stand to get scammed.

Re: Groupon is Effectively Insolvent

#67

Post by michael_dorfman »

Cherian_Abraham wrote: post #66
jpadvo wrote: post #55

Earlier quoted context omitted.

This was a purchase: the investors bought part of the company. When they signed over a billion dollars, they were not trying to fund operations; they wanted to become part owners. They know that the vast bulk of the money would go straight to earlier employees and investors. This was a risky investment, yes. But it is neither unbelievably stupid nor criminally insane to make a risky investment. High risk investments…

I cant agree with that. When I invest, I have some expectations as to how that money should be invested, and for a company that is in desperate need of cash inflow to sustain its growth, thats where it should go. Period. Not to the coffers of early investors and employees. No one has any problem with them cashing out a part of their equity. This however (almost 400 million went to an early investor couple!) was a car…

When I invest, I have some expectations as to how that money should be invested

More than that, you have a prospectus (or term sheet) that will specify those kinds of things. In this case, the Series G investors knew exactly where the money was going, and they were ok with that.

As for the public getting scammed, the SEC has a metric buttload of regulations aimed at seeing that that doesn't happen.

Re: Groupon is Effectively Insolvent

#68

Post by gthank »

bcostlow wrote: post #36
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…

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 l…

You won't see me saying that I think Groupon is a great value or anything, but I think that you have to acknowledge the difference between the people Groupon is reaching and the people FB or Google is reaching: Groupon's audience is people who are actively looking to spend money, whereas most of the people who see Google or FBs ads are doing something else entirely (and would probably not notice if they just went away).

Re: Groupon is Effectively Insolvent

#69

Post by AJ007 »

unreal37 wrote: post #49
kno wrote: post #28

Earlier quoted context omitted.

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

Advertising. Groupon spends $100 million a month on buying web ads on Facebook and such. They're buying users essentially..

They are also spending a lot on acquiring other daily deal sites around the globe.

Everything they have done so far indicates great competence in what they are doing. There are numerous companies that have blown hundreds of millions of dollars on advertising and ended up with a tiny user base (I can think of a particular MVNO a few years back.) Then you have failed acquisitions such as Cisco buying Flip, where the buyer ends up shutting the company down.

Neither Groupon's customer or business acquisition strategy is a coin flip. They know very well what these users and business's are worth and they have all of the tools in place to monetize them.

Without an extremely aggressive and hyper growth strategy, Groupon stands little chance against Google or Facebook. If they wanted a path on easy street, the original investors could have sat around pocketing millions of dollars a month for years. Once Groupon decided to go big or go bust their profile was raised to the point that ceased to be an option.

The real wild cards here are not so much what Google and Facebook do but rather what the business clients do. There is a very fine balance between delivering great value to both sides of the equation. Tipping too far in one direction destroys their brand. I've heard plenty of complaints from users about the quality of Groupon's deal offerings.

If Groupon can continue to demonstrate an ability to successfully overcome these challenges while staying a step ahead of Google and Facebook, they might be around for a while.

Will they deliver fantastic returns for shareholders at a mature $20 billion valuation over the long term? That is a completely different question, but if you think that an answer of no equates Groupon with a ponzi scheme, all financial markets are ponzi schemes.

Re: Groupon is Effectively Insolvent

#70

Post by r00fus »

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.

Safari [reader] button (or readability bookmarklet) fixes this (as well as many other reader-unfriendly pages).
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