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Groupon has no viable business model

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Re: Groupon has no viable business model

#101

Post by dockd »

coffeemug wrote: post #57

It's almost as if people derive personal satisfaction from poking holes in Groupon's success (or any startup, for that matter). Groupon has no viable business model, people will get tired of Zynga's games, Twitter can't monetize, Facebook will be killed by Google+/is useless/the ads on it aren't worth anything, etc. Every time one of these things gets pointed out, people show up and start high-fiving each other, say…

Until they see a massive success?

Are we defining massive success as finding more investors to give them money or making money? Maybe as an employee the two are equivalent but as an investor you're really hoping for the latter.

> and we knew it all along

Agreed on this. Think of a tech company that doesn't exist, say DEC. Were they a success or a failure? The answer of depends on when you ask the question. Is Microsoft currently a success or a failure? What about 10 years from now?

It reminds me of the person in the gym who, circa 2001, declared he'd been "predicting the stock market would fall for years". :)

Re: Groupon has no viable business model

#102

Post by mathattack »

Here's where I struggle...

Everything you say about Groupon today applied to Amazon in the late 90s. They were accused of being a pyramid scheme. They were accused of bad accounting because they counted free shipping as a one time expense. They were never going to succeed. Fast forward 15 years and Borders is going out of business, Barnes and Noble is in retreat and Amazon moved beyond books to retailing everything - including the cloud.

My nature is to be a cynic, and I roll my eyes when people make up new metrics. I look for cash rather than an opinion on earnings. Even Generally Accepted Accounting Principles can be gamed, let alone non-GAAP metrics. But maybe this time they're right.

This isn't to say Groupon will succeed, but there is some precedent. Maybe they are more Amazon than eToys.

Re: Groupon has no viable business model

#103

Post by lorax »

mathattack wrote: post #102

Here's where I struggle... Everything you say about Groupon today applied to Amazon in the late 90s. They were accused of being a pyramid scheme. They were accused of bad accounting because they counted free shipping as a one time expense. They were never going to succeed. Fast forward 15 years and Borders is going out of business, Barnes and Noble is in retreat and Amazon moved beyond books to retailing everything -…

Agreed to a certain extent. The real question you have to ask is "If they hit their scaling targets, would it be successful", for Amazon, the answer was yes (thought there were significant doubts whether or not they could hit their targets). For Groupon, people question if they could be successful even if they hit their scaling targets.

BTW, people also questioned AOL for shipping all those CD's and counting it as an investment instead of a marketing expense.

Re: Groupon has no viable business model

#104

Post by [deleted] »

coffeemug wrote: post #57

It's almost as if people derive personal satisfaction from poking holes in Groupon's success (or any startup, for that matter). Groupon has no viable business model, people will get tired of Zynga's games, Twitter can't monetize, Facebook will be killed by Google+/is useless/the ads on it aren't worth anything, etc. Every time one of these things gets pointed out, people show up and start high-fiving each other, say…

[deleted]

Re: Groupon has no viable business model

#105

Post by daxmiller »

I don't want to comment on Groupon's business model per se, nor whether the concerns expressed are truly valid.

However, there appears to be a meta-concern brewing, which I summarize as "... people suspect there's a high tech bubble that is going to crack at some point. If/when this happens we'll all need a poster child to point to that helps explain and summarise the why/how/who/when of the bursting of the bubble." Perhaps Groupon is the leading contender to fill this role.

Re: Groupon has no viable business model

#106

Post by larrys »

OpenAmazing wrote: post #50
coenhyde wrote: post #36

The viable business model for Groupon is to shed 90% of it's 7500 employees, improve business satisfaction and let the businesses come to them. This may be hard now that Groupon has such a bad reputation amongst businesses. Groupon was too enthusiastic to become big rather than good. I understand why they thought it was necessary and to some degree I agree that it was the correct game to play but I think they have de…

let the businesses come to them That will never happen. That's the fundamental problem with "local". Small businesses and mom-and-pop shops need to be called and convinced. They need their hand held. They aren't studying lean marketing practices or split testing their offers. Look at the head counts for ad sales vs editorial for any local publication (newspaper, magazine, newsletter). If you want to sell to local bus…

Absolutely true. Reminds me of the yellow pages sales team. They had to show up to get the ad and coax it out of people who had success. Also, a small business advertising publication that I was affiliated with had the same issue. You couldn't run it remotely from another city. You had to be on the street collecting the ad copy from the pizza shop. And you were lucky if the owner was there for the "appointment" as well.

Re: Groupon has no viable business model

#107

Post by ngsayjoe »

jamiequint wrote: post #87
coffeemug wrote: post #57

It's almost as if people derive personal satisfaction from poking holes in Groupon's success (or any startup, for that matter). Groupon has no viable business model, people will get tired of Zynga's games, Twitter can't monetize, Facebook will be killed by Google+/is useless/the ads on it aren't worth anything, etc. Every time one of these things gets pointed out, people show up and start high-fiving each other, say…

The point is that its not real success, its fake success propped up by massive funding rounds and there are numbers to back it up. Note that their ARPU (for customers) is less than their marketing cost. Fixing this # before growing is what Clayton Christensen is talking about when he says "impatient for profit but patient for growth". Groupons unit economics suck and they're not getting better. Revenue and subscriber…

Q: What's wrong with Groupon?

A: Absolutely nothing! It is truly a company that lives by their words when they pitch to their merchants, which is "Lose Money On Every Sale!"

Re: Groupon has no viable business model

#109

Post by lwat »

chollida1 wrote: post #65
jellicle wrote: post #46

The long-term problem is simply this: Groupon isn't adding value to anyone. For customers, Groupon adds almost no value. A great marketing deal will get publicized anyway - there are hundreds of websites devoted to coupon/code sharing. So if a business wants to offer 50% off, they could spend five minutes mailing a couple of these sites, and there would be plenty of publicity for their deal. For almost all businesses…

> Groupon isn't adding value to anyone. I don't think this is true. The fact that so many people are using it is proof to me that it provides value. I can safely say that Groupon provides value to me. I can't say that it provides value to any business',as I'm not a business owner, but that's not what you said above.

What portion of Groupon clients use it once and then never again?

Re: Groupon has no viable business model

#110

Post by gojomo »

coffeemug wrote: post #57

It's almost as if people derive personal satisfaction from poking holes in Groupon's success (or any startup, for that matter). Groupon has no viable business model, people will get tired of Zynga's games, Twitter can't monetize, Facebook will be killed by Google+/is useless/the ads on it aren't worth anything, etc. Every time one of these things gets pointed out, people show up and start high-fiving each other, say…

Be careful of summing together reactions from different people as if they represented a single common or average reaction.

There are loud critics of each your examples... but very few people, other than the relentlessly negative, are likely to be sour on them all. The fact that there are enough naysayers to fill any given comment-thread or link-aggregator is just evidence of the breadth and opinion-diversity of the audience now commenting, and that our modern filtering systems especially promote dissent and controversy.

(I say this as someone who thinks Facebook has great prospects, Twitter has challenges but will probably figure something out to justify its recent valuations, Zynga may be questionable on social-value grounds but will likely remain a strong business... and yet there's something fishy about Groupon, from its top-level accounting to its street-level dealings with small-businesses and customers, that makes me think by 2013 Groupon could be considered Chicago's Enron.)

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