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Groupon updates IPO filing, admits it's unprofitable

money.cnn.com

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

#81

Post by lusr »

jcampbell1 wrote: post #27

If you are interested in Groupon's actual performance rather than a reporter's linkbait, see the filing. I find the table on page 57 rather informative about the current state of the business. http://sec.gov/Archives/edgar/data/1490281/00010474691100717...

What stands out to me: Cost of Revenue is consistently 60% and admin consistently 30%. Judging from the comments I've been reading about the hit merchants are taking, I doubt the CoR% will change, and admin sounds about normal so unlikely to change much either.

That means even if they cut their marketing budget down to 0% they're still only looking at 10% profit BEFORE taxes. I really don't see how their business is going to be profitable in the short or long run, given the losses they've run up getting to this point.

Does anybody think these things are not really about the fundamental business at all but rather just a very impressive performance designed to make a few people rich from IPO/mergers?

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

#82

Post by Gustomaximus »

lusr wrote: post #81
jcampbell1 wrote: post #27

If you are interested in Groupon's actual performance rather than a reporter's linkbait, see the filing. I find the table on page 57 rather informative about the current state of the business. http://sec.gov/Archives/edgar/data/1490281/00010474691100717...

What stands out to me: Cost of Revenue is consistently 60% and admin consistently 30%. Judging from the comments I've been reading about the hit merchants are taking, I doubt the CoR% will change, and admin sounds about normal so unlikely to change much either. That means even if they cut their marketing budget down to 0% they're still only looking at 10% profit BEFORE taxes. I really don't see how their business is…

I'm going with very impressive performance designed to make a few people rich from IPO/mergers?

On the up side we can take our shot at making some money shorting the stock if it sells at these planned inflated values.

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

#83

Post by o1iver »

OpenAmazing wrote: post #78
WarDekar wrote: post #50

Earlier quoted context omitted.

Not only is their accounting on customer acquisition bogus, but how do they possibly value these customers? FTA: Groupon's subscriber count -- the one Mason says it is spending aggressively to beef up -- now stands at 116 million, up from 83 million at the end of last quarter. Among those subscribers, 23 million have purchased a Groupon at least once. So they have 116 million "customers," but less than 1 in 5 of thos…

No. The email subscribers are Groupon's customers - if you define "customer" as "where the money comes from". Every day Groupon sends out a daily deal to their email subscribers. Some percent of those subscribers opt to purchase the deal and go to Groupon's website and pay with a credit card. That's where the money comes from. Groupon then distributes some of that money at a later date to the merchant offering the de…

I don't understand your argument. If customers are "where the money comes from", then 1/5 of the subscribers are customers.

People who don't pay are not customers, they are part of the let's call it the "marketing audience".

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

#84

Post by shrikant »

Tofusensei wrote: post #64
jayzee wrote: post #49

Earlier quoted context omitted.

It was actually smart. Groupon wanted a hefty break-up $5B fee. Google refused. Groupon must have known that the deal would never pass muster at Google after real number crunching. Hence they refused. With the break-up fee they would have still made like bandits.

Source?

http://www.pcmag.com/article2/0,2817,2373870,00.asp

"I think the holdup on GOOG/Groupon deal is size of break-up fee if Gov't blocks deal," wrote Venrock venture capitalist David Pakman in a Twitter message early December 3.

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

#85

Post by krschultz »

o1iver wrote: post #83
OpenAmazing wrote: post #78

Earlier quoted context omitted.

No. The email subscribers are Groupon's customers - if you define "customer" as "where the money comes from". Every day Groupon sends out a daily deal to their email subscribers. Some percent of those subscribers opt to purchase the deal and go to Groupon's website and pay with a credit card. That's where the money comes from. Groupon then distributes some of that money at a later date to the merchant offering the de…

I don't understand your argument. If customers are "where the money comes from", then 1/5 of the subscribers are customers. People who don't pay are not customers, they are part of the let's call it the "marketing audience".

He's replying to the idea that Groupon's customers are the merchants. If anything, the merchants are Groupon's partners.

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

#86

Post by spanktheuser »

hvs wrote: post #18
Cushman wrote: post #15

Earlier quoted context omitted.

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…

If you look at many subscription-based businesses (newspapers, cable providers, mobile voice/data companies), you'll often see businesses where the cost of acquisition is pretty low compared to the life-time value of a customer. Newspapers (pre-Web) are a particularly good example of this - most of their costs were in production/distribution. Acquiring a customer was relatively cheap and churn relatively low.

So anecdotally, there are historical business models that feature low acquisition costs & low churn.

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

#87

Post by ianferrel »

suking wrote: post #62
ianferrel wrote: post #56

Earlier quoted context omitted.

I believe Groupon's policy is that purchases don't ever expire, just the deal does. If you pay $x for some deal, and expires, you still have a credit of $x with that business.

I think state law pre-empts groupon's policy (Ca's law states it cannot expire unless the card is to multiple retailers and then it must clearly list the expiration date on it).

Groupon's policy is in accordance with CA state law. I don't see how it's pre-empted.

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

#88

Post by [deleted] »

blantonl wrote: post #70
cletus wrote: post #37

Groupon is a fundamentally bad business and I wouldn't touch it with a 10 foot cattle prod. Some say that we know they're not profitable but that's really not the point. By counting customer acquisition as an extraordinary expense they are implying that: 1. The value of that customer is AT LEAST as much the cost of acquisition; and 2. That cost also accounts for the natural loss of customers. This is shady because (I…

After the IPO happens... this will quite possibly be the best or worst post that ever occurred on HN. I can't wait to come back to this in a year. If the IPO happens.

[deleted]

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

#89

Post by tmandarano »

cletus wrote: post #37

Groupon is a fundamentally bad business and I wouldn't touch it with a 10 foot cattle prod. Some say that we know they're not profitable but that's really not the point. By counting customer acquisition as an extraordinary expense they are implying that: 1. The value of that customer is AT LEAST as much the cost of acquisition; and 2. That cost also accounts for the natural loss of customers. This is shady because (I…

You're spot on. Groupon and the hundreds of other daily deal copycats out there are going to implode. It's not sustainable. It's an incredible deal for the customer (no doubt about that), but the business loses money.

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