21–30 of 77 posts
I believe some of Charles Ponzi's companies also suffered from these kinds of structural problems, luckily Ponzi like Mason was able to exit his position in the company through follow on investors before the issues started to seriously affect the valuation of the company.
"Groupon must spend to grow, but must continue growing to cover its operational expenditures" I believe some of Charles Ponzi's companies also suffered from these kinds of structural problems, luckily Ponzi like Mason was able to exit his position in the company through follow on investors before the issues started to seriously affect the valuation of the company.
The problem with all of these analysises is that they focus on rather meaningless things. Lots of companies operate with bigger debt than assets, as long you have incoming cash you can just get a bridging loan against it. What profitability comes down to is what the lifetime value of a user (in this case we have two types of users, consumers and providers) is and the cost of acquiring a user. Nothing else really matt…
Thats not the problem. The problem is greater expenditures then income. Very few companies survive long in this position.
The problem with all of these analysises is that they focus on rather meaningless things. Lots of companies operate with bigger debt than assets, as long you have incoming cash you can just get a bridging loan against it. What profitability comes down to is what the lifetime value of a user (in this case we have two types of users, consumers and providers) is and the cost of acquiring a user. Nothing else really matt…
Sure, it's a new market and there are some unknowns, but the only route to success with their current strategy is fanaticaly loyal consumers (who are very disloyal to providers but will be loyal to groupon over it's competitors?) and an ever expanding number of businesses that are willing to try groupon but have so far been unlikely to return.
Sure, it might be an Amazon but it seems arbitrary to pick that comparison considering how many other businesses arounds Amazons time turned out to be exactly what everyone said they were: unsustainable.
The problem with all of these analysises is that they focus on rather meaningless things. Lots of companies operate with bigger debt than assets, as long you have incoming cash you can just get a bridging loan against it. What profitability comes down to is what the lifetime value of a user (in this case we have two types of users, consumers and providers) is and the cost of acquiring a user. Nothing else really matt…
Amazon was building a retail infrastructure and they succeeded in providing value to their customers.
Groupon is busy spending truckloads of cash on luring businesses into their pyramid scheme, while founders and early-stage VCs are cashing in.
Pray tell how either customers or businesses are benefiting from Groupons. Is Groupon providing them with some service that I cannot duplicate tomorrow? Are they building some secret infrastructure that no one knows about? Follow the money, and you will see that no such thing exists.
Groupon is a fraud, and it's time we call it the way it is.
Well its a good thing $810M of their $946M round paid out the founders and early investors. Now no one but the late round VC's and the 5000 employees get stuck holding the bag if this thing implodes. This is the problem with those early payouts (I don't mind these in theory but this case was egregious). There's not a lot of incentive anymore for the people running the company to do anything but what they're currently…
I wrote a little about this: Another way to respond to this critique: Groupon could have theoretically solved this problem by adopting faster payment plans for merchants. That would make theirs a worse business with lower cash flow, but it would help their PR (and perhaps their valuation). It’s counterintuitive that Groupon could make their business worse but make their valuation better—it depends on whether their sh…
I don't understand, from Blodget: ". "As of June 30, Groupon had $680 million in current liabilities -- bills the company has to pay,".... "Meanwhile, Groupon only had $376 million of current assets with which to pay them." " If they pay their merchants faster, where would they get the money? I just checked at Wikipedia, and, "A Ponzi scheme is a fraudulent investment operation that pays returns to separate investors…
it's increasingly clear that groupon is essentially a ponzi scheme with some graphic design. can't wait for the post mortem documentary a la "the smartest guys in the room".
Groupon's cash flow is just like any other business: it buys merchandise (coupons) from vendors (on a net 60 basis), marks it up and sells it to consumers. How is that a ponzi scheme? I think you might be confused since many news outlets are making it sound like today's Groupon buyer's are funding yesterday's vendors in some sort of mischievous way. But that's how all businesses work.
Well its a good thing $810M of their $946M round paid out the founders and early investors. Now no one but the late round VC's and the 5000 employees get stuck holding the bag if this thing implodes. This is the problem with those early payouts (I don't mind these in theory but this case was egregious). There's not a lot of incentive anymore for the people running the company to do anything but what they're currently…
Also, there are many examples of fantastically wealthy folks who remain quite motivated.