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Why Groupon Is Poised For Collapse

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Re: Why Groupon Is Poised For Collapse

#121

Post by sunchild »

jacques_chester wrote: post #119
sunchild wrote: post #117

Earlier quoted context omitted.

I don't mean to diminish accounting as a discipline. I'm sorry if I came across that way. My point was that the cash position doesn't reflect real revenue until the contingency is cleared. At best, you can "gamble" with the money while you have it.

I only did one unit of accounting to see what the fuss was about. Quite enlightening really. Cash positions are a different beast from revenue -- and indeed that's why Income Statements (aka P&L) and Cashflow Statements are both produced -- to give that two-way perspective on a business, along with the Balance Sheet. All three are connected and you can, given a sample, derive them from each other. But to understand h…

I reiterate: if you treat the proceeds as revenue before the contingency is lifted, you are effectively gambling with the funds.

Re: Why Groupon Is Poised For Collapse

#122

Post by tonf »

dspeyer wrote: post #113
encoderer wrote: post #93

Earlier quoted context omitted.

As sensational as your statement is, it has absolutely no relevance to the analysis of Groupon as a business. Groupon believes they have a reliable fix on the Customer Lifetime Value. Some very smart investors who have done _actual_ analysis of Groupon (including the team that did due diligence for Google when they made the buyout offer earlier this year) clearly have at least some faith in these CLV numbers. All of…

Did Google actually make an offer for Groupon? IIRC, Google's never said either way, and it seems unlikely (they'd be a horrible culture clash, if nothing else).

Does anybody have any link to the source with some official statement that Google really made an offer to buy Groupon? Everybody are talking about this like it was a real fact but all articles I saw were rumors only.

Re: Why Groupon Is Poised For Collapse

#123

Post by bennyk »

I have to say that there was interesting thinking going into the Groupon model.It seems that the business may use it as a lost leader to show and showcase other products and services. For the business warm bodies mean opportunity.Each system has flaws this one has been very well pointed out in the article and the risks seem worth it for many companies.How to eliminate abuse. That is the question

Re: Why Groupon Is Poised For Collapse

#124

Post by edanm »

pja wrote: post #120
edanm wrote: post #118

This article has some serious problems. There's a huge anti-Groupon bias (apparently shared with most of HN). This is fine, it's ok not to like Groupon, but some of the points this article makes are absolutely terrible. For example, take this: "I had been struggling to understand why some businesses ran repeat Groupons or cycled among the various daily deal vendors, given that the economics clearly suck if you can’t…

Right, because obviously a small business owner is going to be happy to tell some random journalist who phones them up, "Yeah, we did that third GroupOn deal because otherwise we weren't going to be able to pay the rent". They'll make up some waffle that regurgitates GroupOn talking points in order to justify their actions to an outsider without giving away the fact that the company is on the verge of bankruptcy & if…

Do you realize that by that same logic, you're basically saying journalism can't exist, period? It's always a case of some "random journalist" phoning people up and asking them tough questions.

Journalism does exist, of course, so obviously there are ways around this problem. They're pretty easy to see even in this case - journalistic confidentiality, i.e. the journalist won't reveal the source, therefore no one will know anything about which company is on the verge of bankruptcy.

Re: Why Groupon Is Poised For Collapse

#125

Post by macnulty »

justin_vanw wrote: post #72
pemulis wrote: post #62

Earlier quoted context omitted.

3. Most of the people redeeming Groupons will come at peak hours, so you still have excess capacity at slow hours. If Groupon Now (or something similar) catches on, that might solve the problem of excess capacity, but Groupon Classic does not.

This isn't true of all things, for example you have to make an appointment to get a haircut most places, and for things like rafting trips or overnight stays you always do.

Call me a redneck but I've never made an appointment to get a haircut in my life, and "rafting trips or overnight stays" are a pretty selective subset in my opinion.

Speaking from personal experience, the GP is correct. At my local climbing gym, the groupon special just brings in 30 extra new faces to the already crowded gym during peak hours. The slow times are just as slow as always.

They are now under-staffed during the peak hours (which get busier every time they offer a special) which means that the general state of the gym declines and the new customers just accept it because hey, they got a deal right?

It's a race to the bottom and I can see customers turning to businesses that focus on offering a great experience every day. Those businesses don't use groupon.

Re: Why Groupon Is Poised For Collapse

#126

Post by encoderer »

nkurz wrote: post #110
wisty wrote: post #105

Earlier quoted context omitted.

Not really. Often, food is 30%, staff is 30%, rent is 30% and 10% goes to the owners (who are paying for a 300k fitout). Coffee markups can be even crazier. Obviously, it depends on the restaurant. A good value steak-house might sell a steak, chips, and veggies where the food costs 70% of the meal; but they have large volumes and hope to sell lots of drinks. Anyway ... the staff and building sit idle for a lot of the…

You sound very authoritative, but some of your numbers seem odd. Do you have a source for your 30% rent figure? Most sources I see suggest a much lower number: http://www.4hoteliers.com/4hots_fshw.php?mwi=1661

I'm not a restaurant guy but I am known to be able to read income statements with my eyes closed :)

Assuming the GP was generalizing "Rent" to include all expenses associated with the physical plant and presence, the sample income statement linked is close enough to that 30% number.

But your call on whether my assumption is too generous :)

Re: Why Groupon Is Poised For Collapse

#127

Post by linuxhansl »

Yep.

When Google offered $6bn for Groupon I was... surprised. What surprised me more at that time was that Groupon declined the - already exceedingly overpriced - offer.

Then again, LinkedIn was at one point worth $12bn and still is an insane $7bn (P/E of 1,139.40!!). Facebook is said to be worth $100bn.

I think we collectively lost our value judgment when it comes to Internet companies.

Re: Why Groupon Is Poised For Collapse

#128

Post by joe_the_user »

encoderer wrote: post #126
nkurz wrote: post #110

Earlier quoted context omitted.

You sound very authoritative, but some of your numbers seem odd. Do you have a source for your 30% rent figure? Most sources I see suggest a much lower number: http://www.4hoteliers.com/4hots_fshw.php?mwi=1661

I'm not a restaurant guy but I am known to be able to read income statements with my eyes closed :) Assuming the GP was generalizing "Rent" to include all expenses associated with the physical plant and presence, the sample income statement linked is close enough to that 30% number. But your call on whether my assumption is too generous :)

I wasn't.

A pan may be a fixed expense but it is to a significant-extend used up at the rate that people consume food, so it's not really "free" if fewer people are in the restaurant. Only "rent rent" and wages if fewer people in the restaurant.

Essentially, economies of scale might be possible in operating a restaurant but the place would need to be organized for this from the beginning - the simple ability to get people in the door is worth less than a large share of the receipts.

Re: Why Groupon Is Poised For Collapse

#129

Post by encoderer »

joe_the_user wrote: post #128
encoderer wrote: post #126

Earlier quoted context omitted.

I'm not a restaurant guy but I am known to be able to read income statements with my eyes closed :) Assuming the GP was generalizing "Rent" to include all expenses associated with the physical plant and presence, the sample income statement linked is close enough to that 30% number. But your call on whether my assumption is too generous :)

I wasn't. A pan may be a fixed expense but it is to a significant-extend used up at the rate that people consume food, so it's not really "free" if fewer people are in the restaurant. Only "rent rent" and wages if fewer people in the restaurant. Essentially, economies of scale might be possible in operating a restaurant but the place would need to be organized for this from the beginning - the simple ability to get p…

Actually i meant the GP to my post -- wisty. Not that it matters, of course, I'm just clarifying so my post makes more sense to you.

I generally disagree with your sentiments in your post but had nothing to add that really interested me to say.

Re: Why Groupon Is Poised For Collapse

#130

Post by jacques_chester »

sunchild wrote: post #121
jacques_chester wrote: post #119

Earlier quoted context omitted.

I only did one unit of accounting to see what the fuss was about. Quite enlightening really. Cash positions are a different beast from revenue -- and indeed that's why Income Statements (aka P&L) and Cashflow Statements are both produced -- to give that two-way perspective on a business, along with the Balance Sheet. All three are connected and you can, given a sample, derive them from each other. But to understand h…

I reiterate: if you treat the proceeds as revenue before the contingency is lifted, you are effectively gambling with the funds.

Sure. If they're doing that, I'd be tempted to call shennanigans.
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