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The Fall of Groupon: Is the Daily-Deals Site Running Out of Cash?

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Re: The Fall of Groupon: Is the Daily-Deals Site Running Out of Cash?

#61

Post by jerf »

ig1 wrote: post #53
yuvadam wrote: post #25

Earlier quoted context omitted.

Let's stop with the Amazon analogy. Yes, Groupon, like early-day-Amazon, is bleeding cash on customer acquisition. It ends there. 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…

I'd like to see you build a global local salesforce tomorrow. Groupon's infrastructure isn't technological but rather operational and human resource based, something which is actually much harder to duplicate than technology. It's likely the reason that Google wanted to buy them isn't for daily deals, but the fact that they've got a huge salesforce with expertise in selling to local businesses. Local business ad spen…

"I'd like to see you build a global local salesforce tomorrow."

I don't need to build a global local salesforce for Groupon to be in serious trouble. Hundreds of people can build local salesforces in their own area, and the aggregate will cause Groupon trouble.

It's a bit of a different criticism that what most people are making, but I'm not seeing a big advantage to Groupon centralizing vs. hundreds of fast-moving much smaller competitors. There's hardly any economies of scale to speak of, the market in question is effectively made of people who have minimal "brand loyalty" pretty much by definition, even if every other criticism made is false I still have a hard time seeing an outcome in which Groupon actually own the national local market, precisely because "national local market" is basically an oxymoron. Even if they don't collapse under their weight, they'll still be pecked to death by hundreds of hungry budgies.

Re: The Fall of Groupon: Is the Daily-Deals Site Running Out of Cash?

#62

Post by felipemnoa »

iwwr wrote: post #17
chlee wrote: post #12

If the owners didn't take ~700 million of the table from the last rounds of founding, groupon would be in a better financial situation than they are today.

If they didn't, they may not have had a second chance.

Which underscores one of the main problems. If the founders didn't think they were going to have a second chance, why should anybody else?

Re: The Fall of Groupon: Is the Daily-Deals Site Running Out of Cash?

#63

Post by puredemo »

shawndrost wrote: post #55
ForrestN wrote: post #34

The competition for most outlandish criticism of Groupon is getting really boring. All of these articles ignore the same basic facts. Groupon is spending a huge amount on customer acquisition. They've stated numerous times that this is a short-term competitive play, to try to create as much of an advantage as possible to counteract the dozens of clones by building up their brand awareness and subscriber list. The ide…

I'm in full agreement. Relatedly, why so much hatred for Groupon's ACSOI metric? If you believe you've got a great business, expansion via deficit spending is one possible strategy. If you're pursuing this strategy, you'll need metrics that show how you would be doing if you weren't expanding via deficit spending. Reasonable people can disagree about whether Groupon is a great business at its core, and whether the AC…

It's just a bit off-putting that a company would try to justify a $10B - $30B valuation when they have never shown any net profit.

Re: The Fall of Groupon: Is the Daily-Deals Site Running Out of Cash?

#64

Post by lnxkrnl »

joe_the_user wrote: post #31
maukdaddy wrote: post #19

Earlier quoted context omitted.

100% correct and it really makes me wonder what the late round VCs were thinking. The only I can come up with is pure greed - willing to take an enormous risk for future IPO (above and beyond typical VC risk)

Well, If we're wildly speculating, we could also imagine kick-backs and money laundering. I know nothing of Groupon's financing. I know Digital Sky was a large, late investor in Facebook. And they are controlled by a Russian oligarch. Wealthy criminals are sometimes willing to invest in unprofitable businesses to launder money, buy influence and hope that a bigger fool will follow them.

If Yuri Milner is the Russian mafia money man. He is f*cked. Most of his investments are going to implode in a double dip recession, and bring down the rest of Silicon Valley elites.

Re: The Fall of Groupon: Is the Daily-Deals Site Running Out of Cash?

#65

Post by pbreit »

tokenadult wrote: post #60
pbreit wrote: post #59

Earlier quoted context omitted.

If you disagree with a post, you should post a reply with your arguments. Downvoting should not be used for simple disagreement.

Downvoting should not be used for simple disagreement. That's nowhere in the Hacker News Guidelines. http://ycombinator.com/newsguidelines.html You are, of course, entitled to your opinion about how to use downvoting, but other users here are entitled to theirs. Here is what pg said about the matter 1280 days ago: http://news.ycombinator.com/item?id=117171 "I think it's ok to use the up and down arrows to express agr…

Regarding the first citation, I think this response is more useful: http://news.ycombinator.com/item?id=117237

And your second example makes better sense than your first. None of those three reasons have to do with agreeance.

Downvoting causes comments to literally disappear. It's tragic that good comments disappear because some people disagree. Those are frequently the most valuable comments.

Downvoting should be reserved for obviously low/no value comments. It adds no value to downvote comments merely because they express that Groupon might have a viable business.

Re: The Fall of Groupon: Is the Daily-Deals Site Running Out of Cash?

#66

Post by pbreit »

tokenadult wrote: post #60
pbreit wrote: post #59

Earlier quoted context omitted.

If you disagree with a post, you should post a reply with your arguments. Downvoting should not be used for simple disagreement.

Downvoting should not be used for simple disagreement. That's nowhere in the Hacker News Guidelines. http://ycombinator.com/newsguidelines.html You are, of course, entitled to your opinion about how to use downvoting, but other users here are entitled to theirs. Here is what pg said about the matter 1280 days ago: http://news.ycombinator.com/item?id=117171 "I think it's ok to use the up and down arrows to express agr…

Why would you want to hide comments that you merely disagree with? That goes against everything a quality discussion site like HN stands for. Downvoting should be used for comments that do not advance the discussion.

Re: The Fall of Groupon: Is the Daily-Deals Site Running Out of Cash?

#67

Post by sunchild »

r00fus wrote: post #51
ForrestN wrote: post #34

The competition for most outlandish criticism of Groupon is getting really boring. All of these articles ignore the same basic facts. Groupon is spending a huge amount on customer acquisition. They've stated numerous times that this is a short-term competitive play, to try to create as much of an advantage as possible to counteract the dozens of clones by building up their brand awareness and subscriber list. The ide…

None of this "land grab" reasoning answers my concern I raised earlier ( http://news.ycombinator.com/item?id=2870094 )... how is Groupon going to defend their landgrab? There are NO BARRIERS in this market, as far as anyone can explain to me. I'd love to hear any reasonable argument as to how Groupon will defend it's ground. It's not like the big boys (Google: Offers, Amazon: LivingSocial) are ignoring the space eith…

I can tell you for sure: no one I've ever met is remotely loyal to Groupon. Groupon is viewed as, at best, a deal – at worst, an off-target annoyance.

There are no meaningful barriers to entry. Margins will tend to zero in the face of competition. Users have no lasting connection to Groupon's web presence. Every new model propose by Groupon further erodes its original appeal: false scarcity. Meanwhile, there's a war for customer acquisition, with spending up to $40 per user, when it should be closer to $2.50.

Anyone who gave this market a serious look saw these issues coming a thousand miles away.

Re: The Fall of Groupon: Is the Daily-Deals Site Running Out of Cash?

#68

Post by chromatic »

webwright wrote: post #50
dreww wrote: post #40

Earlier quoted context omitted.

if groupon is losing money on every customer, adding more customers actually exacerbates the cash flow problem, and every time those customers buy a deal, groupon goes farther in the hole. they use the cash to pay their oldest debts but eventually there will be a reckoning. it's unfathomable to me that it would be an attractive investment.

For how many years did Amazon lose money on every customer? Land grabs WORK. I'm not convinced that it will here, or that Groupon is a good investment at its current valuation... But the idea that a retail voucher business can't be self-sustaining seems kinda silly. Groupon has 42% gross margins in 2011 q1 ( UP 6% from the previous quarter).

For how many years did Amazon lose money on every customer?

Fewer than most people think. Consider the financial model of a (successful) grocery store ostensibly losing a penny on each transaction. If you're clever, you can make plenty of money by arranging your contract terms carefully.

Re: The Fall of Groupon: Is the Daily-Deals Site Running Out of Cash?

#69

Post by danmaz74 »

pbreit wrote: post #38
danmaz74 wrote: post #29

Earlier quoted context omitted.

The Ponzi scheme allegation isn't about the cash flow model, it's about the investment return model: Groupon used money from the late investors to pay back the first ones with a profit, even if for now their business is losing money - and it isn't clear if they will start making real money from their business model. Or at least enough money to make the total investment worthwhile.

I've typically seen "ponzi" referencing Groupon's business model, not it's financing activity. Having a late stage investor payoff earlier investors/shareholders is not uncommon. IPO investors then payoff those investors and so forth. Is that what you mean?

Yes, that's what I mean. Ponzi schemes are about investors - who expect to earn money from their investment - not about consumers.

In the end, if after the IPO the business starts making money and that money gives a healthy return to the latest investors, everything is fine. If, on the other had, it turns out that the business model can't give a return on the investment and the latest investors lose their money, which was used to pay off the first investors, the mechanic of a Ponzi scheme is perfectly respected :)

Re: The Fall of Groupon: Is the Daily-Deals Site Running Out of Cash?

#70

Post by ig1 »

jerf wrote: post #61
ig1 wrote: post #53

Earlier quoted context omitted.

I'd like to see you build a global local salesforce tomorrow. Groupon's infrastructure isn't technological but rather operational and human resource based, something which is actually much harder to duplicate than technology. It's likely the reason that Google wanted to buy them isn't for daily deals, but the fact that they've got a huge salesforce with expertise in selling to local businesses. Local business ad spen…

"I'd like to see you build a global local salesforce tomorrow." I don't need to build a global local salesforce for Groupon to be in serious trouble. Hundreds of people can build local salesforces in their own area, and the aggregate will cause Groupon trouble. It's a bit of a different criticism that what most people are making, but I'm not seeing a big advantage to Groupon centralizing vs. hundreds of fast-moving m…

Marketing has significant economies of scale, a nationwide marketing campaign tends to cost a lot less per customer acquired than a local one.

It's very possible to own the national local market, good examples of this are Craigslist and (historical college-period) Facebook.

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