Groupon updates IPO filing, admits it's unprofitable • Hacker News Board

Re: Groupon updates IPO filing, admits it's unprofitable

#11

Post by uptown » Wed, Aug 10, 2011, 8:13 PM UTC

What I don't understand is that Google Offers has essentially mimicked the same type of "deals" that Groupon is offering ... usually NYC restaurants I've never heard of, or activities I'm not interested in. Today's offer is "$15 for a tour of the Ground Zero Museum Workshop (up to a $25 value)". So I unsubscribed.

I feel like Google had/has a tremendous opportunity to do what Groupon does, but do it with offers that their users will find valuable. Instead they're just trying to recreate the same cut-rate nail salon discounts and arguably exploitive 9/11 museum "deal".

Re: Groupon updates IPO filing, admits it's unprofitable

#12

Post by lucasjake » Wed, Aug 10, 2011, 8:18 PM UTC

puredemo wrote: post #5

Groupon not selling to Google was the dumbest thing I've ever seen a company do. Ever.

This is pretty simplistic thinking. For all you know Groupon wanted the deal badly, Google walked away from the deal, and both parties agreed to go with the story that Groupon walked away so that it wouldn't kill their prospects of an IPO.

Re: Groupon updates IPO filing, admits it's unprofitable

#13

Post by ZoFreX » Wed, Aug 10, 2011, 8:18 PM UTC

hvs wrote: post #7

yid wrote: post #2

The juice that we're all looking for: > On that basis, Groupon incurred a $420 million operating loss for 2010 and a $117.1 million loss in the first quarter. So they had a slightly worse amortized 1st quarter this year than last.

No worries: We exclude those costs because, unlike our other marketing expenses, they are an up-front investment to acquire new subscribers that we expect to end when this period of rapid expansion in our subscriber base concludes See? Once they acquire all of their subscribers, they will never have to acquire subscribers again. Then they can just rake in the dough.

I'm surprised so few people are familiar with the "land grab", it seems to me that's what they are attempting. In the early days Amazon was spending something like $20 on average per customer acquired and was losing money hand over fist. That's not to say I think Groupon will be the next Amazon: This is a risky strategy. But it can pay off massively if you cement yourself as the only big player in an emerging market.

Re: Groupon updates IPO filing, admits it's unprofitable

#14

Post by timr » Wed, Aug 10, 2011, 8:19 PM UTC

suking wrote: post #3

It has always admitted it's unprofitable - they dropped their BS accounting metric trying to show that with some magic they were making a profit. To be honest their filing reeked so bad and them trying to slip in that crap and not account for marketing expenses - I wouldn't trust their executive team at all.

I'm left wondering why you can still find the word "ACSOI" in the document -- it's right there in the "We don't measure ourselves in conventional ways." section of the letter to investors.

They do seem to have removed the metric from other places...but is it really that hard to do a search through the document before filing with the SEC? The mind boggles.

Re: Groupon updates IPO filing, admits it's unprofitable

#15

Post by Cushman » Wed, Aug 10, 2011, 8:19 PM UTC

hvs wrote: post #7

yid wrote: post #2

The juice that we're all looking for: > On that basis, Groupon incurred a $420 million operating loss for 2010 and a $117.1 million loss in the first quarter. So they had a slightly worse amortized 1st quarter this year than last.

No worries: We exclude those costs because, unlike our other marketing expenses, they are an up-front investment to acquire new subscribers that we expect to end when this period of rapid expansion in our subscriber base concludes See? Once they acquire all of their subscribers, they will never have to acquire subscribers again. Then they can just rake in the dough.

Well, it's plausible, right? The users they have will stick around, and if they stop spending so much on customer acquisition they might be able to reduce their cut and make a profit, meaning even better deals. It could happen.

Or does this not pass the sniff test for some reason I'm missing?

Re: Groupon updates IPO filing, admits it's unprofitable

#16

Post by jcampbell1 » Wed, Aug 10, 2011, 8:21 PM UTC

puredemo wrote: post #5

Groupon not selling to Google was the dumbest thing I've ever seen a company do. Ever.

Google's offer was $6B. The IPO is priced at $30B. I am scratching my head how that is the dumbest thing you have ever seen a company do. Ever. I can see the IPO valuation getting cut to a more reasonable $10B, but that is still more than the Google offer.

Re: Groupon updates IPO filing, admits it's unprofitable

#17

Post by SoftwareMaven » Wed, Aug 10, 2011, 8:22 PM UTC

hvs wrote: post #8

puredemo wrote: post #5

Groupon not selling to Google was the dumbest thing I've ever seen a company do. Ever.

So, does that make Google offering to buy Groupon also one of the dumbest things you've ever seen a company do?

I think Google was willing to pay way more than they should have for Groupon, but I wouldn't call it anywhere near the dumbest thing a company could do.

Re: Groupon updates IPO filing, admits it's unprofitable

#18

Post by hvs » Wed, Aug 10, 2011, 8:23 PM UTC

Cushman wrote: post #15

hvs wrote: post #7

Earlier quoted context omitted.

No worries: We exclude those costs because, unlike our other marketing expenses, they are an up-front investment to acquire new subscribers that we expect to end when this period of rapid expansion in our subscriber base concludes See? Once they acquire all of their subscribers, they will never have to acquire subscribers again. Then they can just rake in the dough.

Well, it's plausible , right? The users they have will stick around, and if they stop spending so much on customer acquisition they might be able to reduce their cut and make a profit, meaning even better deals. It could happen. Or does this not pass the sniff test for some reason I'm missing?

I'm no longer a customer of Groupon. The plural of "anecdote" isn't "data", but I don't know of any company where customer acquisition isn't a major cost. The traditional business school number touted is that is costs 10 times as much to acquire a new customer as it does to maintain an existing customer.

EDIT: I know I may have counteracted my own argument, but my point was that customers are expensive, and the costs don't go away, even if they lessen.

Re: Groupon updates IPO filing, admits it's unprofitable

#19

Post by enjo » Wed, Aug 10, 2011, 8:24 PM UTC

hvs wrote: post #8

puredemo wrote: post #5

Groupon not selling to Google was the dumbest thing I've ever seen a company do. Ever.

So, does that make Google offering to buy Groupon also one of the dumbest things you've ever seen a company do?

Speculating here, but I don't think Google wanted Groupon as an immediate profit center. They wanted their considerable mindshare and ready-made sales and marketing team. I'm guessing that they felt they could merge Googles ability to optimize with that juggernaut and build something to just dominate the local marketing space (particularly the real time stuff).

Re: Groupon updates IPO filing, admits it's unprofitable

#20

Post by hvs » Wed, Aug 10, 2011, 8:27 PM UTC

ZoFreX wrote: post #13

hvs wrote: post #7

Earlier quoted context omitted.

No worries: We exclude those costs because, unlike our other marketing expenses, they are an up-front investment to acquire new subscribers that we expect to end when this period of rapid expansion in our subscriber base concludes See? Once they acquire all of their subscribers, they will never have to acquire subscribers again. Then they can just rake in the dough.

I'm surprised so few people are familiar with the "land grab", it seems to me that's what they are attempting. In the early days Amazon was spending something like $20 on average per customer acquired and was losing money hand over fist. That's not to say I think Groupon will be the next Amazon: This is a risky strategy. But it can pay off massively if you cement yourself as the only big player in an emerging market.

The differences are that 1) Amazon was selling a tangible commodity and 2) they weren't doing it at the expense of the other side of the transaction (i.e. the companies Groupon is selling coupons for).

That isn't to say that they won't find a happy medium where they can balance the need for their customers to get massive discounts without pissing off the businesses, but I'm having trouble seeing it.