Groupon stock sinks to new low, investors sue • Hacker News Board

Re: Groupon stock sinks to new low, investors sue

#111

Post by pbreit » Wed, Apr 04, 2012, 9:06 PM UTC

joezydeco wrote: post #92

__float wrote: post #71

Earlier quoted context omitted.

I don't think that's exactly the same comparison. Orbitz, to me, seems much more corporate and doesn't have the same connection with the developer and startup community that these do. That's not to say Orbitz isn't worthy of attention, merely they don't shove it in our faces like 37signals ;)

No, but it's a good example of a startup that had a solid foundation, good management team, and ramped up into a successful IPO without a 9-figure G round. A lot of other startups have sprung from that event. It's a shame that a lot of people have forgotten that and mention Groupon and GrubHub like they're the one-and-only models for a startup scene in this city.

I have a hard time thinking of Orbitz as a startup since it is/was a joint venture by the airlines.

Re: Groupon stock sinks to new low, investors sue

#112

Post by zaidf » Wed, Apr 04, 2012, 9:07 PM UTC

Uchikoma wrote: post #95

zaidf wrote: post #40

Earlier quoted context omitted.

It worked on the novelty effect and it was doomed to fail. A little premature to write an obituary of a company that finished 2011 with 1.6B in revenue.

If I give 1B to my friends company for a service, and he gives me 1B for a service I provide, do we both have 1B in revenue?

Groupon didn't make its money by swapping money between a couple of friends.

Making a bil in revenue by the way of your example versus Groupon's way have very different risks associated with it.

Re: Groupon stock sinks to new low, investors sue

#113

Post by zaidf » Wed, Apr 04, 2012, 9:10 PM UTC

StacyC wrote: post #96

zaidf wrote: post #40

Earlier quoted context omitted.

It worked on the novelty effect and it was doomed to fail. A little premature to write an obituary of a company that finished 2011 with 1.6B in revenue.

A little premature to write an obituary of a company that finished 2011 with 1.6B in revenue. Revenue != profit. You could generate a trillion in revenue. What's left after the bills are paid is what counts.

Amazon was unprofitable for years after IPO.

If your argument that profits right now are the only thing that matter, then you'd be hating on amazon for the same reason you're hating on groupon. And if Amazon listened to folks like you and went for immediate profitability, they'd likely not have the growth they did.

The real argument anti-groupon folks should be making is that in the long term, they don't see profitability. Too much emphasis is being put on their present unprofitability.

Re: Groupon stock sinks to new low, investors sue

#114

Post by davidmr » Wed, Apr 04, 2012, 9:11 PM UTC

fasteddie31003 wrote: post #9

People I know who currently work for Groupon say that the culture there is falling apart. To get the numbers investors expect the sales people need to reach unrealistic sales numbers. Management is grasping at straws, trying every trick in the book to not let the whole thing fall apart. The Groupon model is simply not sustainable, it was a onetime gimmick. As someone who lives in Chicago, I am worried about its failu…

My impression from working in their building (at a different company) is that they really don't have that many tech people. From what little one can divine from elevator conversations, it seems like far less than 1/10 have anything even remotely technical in their conversations.

Those that are sent packing when Groupon shuffles off this mortal coil will get snapped up in a hurry. The other 5k+ twenty-something sales force will be much more problematic. If you're under 35, you know at least one person who works there, so it's going to be a real horror show when all those people get tossed out on their collective asses.

Re: Groupon stock sinks to new low, investors sue

#115

Post by jacquesm » Wed, Apr 04, 2012, 9:12 PM UTC

Would they have sued if they stock had gone up?

Re: Groupon stock sinks to new low, investors sue

#116

Post by pbreit » Wed, Apr 04, 2012, 9:18 PM UTC

jasonrr wrote: post #27

dantheman wrote: post #17

Earlier quoted context omitted.

It's not a ponzi scheme.

Simply stating it is not a ponzi scheme doesn't advance the conversation in a meaningful way in my opinion. It's really just semantics at this point. There is a lot of evidence here that suggests systematic misleading (if not out-right defrauding) of investors. So you while you are technically correct, I think what Groupon has done is in the spirit of Ponzi even if it is executed differently. What's happened here is…

It's not a ponzi scheme.

Groupon only pays out about 45% of gross bookings. Ponzis generally pay out closer to 100%. Once it brings sales and marketing to a reasonable level it should be wildly profitable.

Re: Groupon stock sinks to new low, investors sue

#117

Post by T-hawk » Wed, Apr 04, 2012, 9:21 PM UTC

rprasad wrote: post #89

zaidf wrote: post #40

Earlier quoted context omitted.

It worked on the novelty effect and it was doomed to fail. A little premature to write an obituary of a company that finished 2011 with 1.6B in revenue.

Part of Groupon's problem is that it did not actually book 1.6billion in revenue under generally accepted accounting principles (GAAP). It booked 1.6billion under Groupon's magical accounting practices (MAP). Under GAAP, money which is contractually owed to a third party at the time of collection is not booked as revenue. Under Groupon's accounting practices, it is. This allows them to inflate revenue while downstati…

Right. What Groupon did is as if PayPal recorded the entire amount of each transaction as revenue, rather than just PayPal's fee slice. It's kind of technically true since Groupon/PayPal does take possession of the money, but it's not revenue in any meaningful sense.

Re: Groupon stock sinks to new low, investors sue

#118

Post by ohashi » Wed, Apr 04, 2012, 9:21 PM UTC

zaidf wrote: post #76

ohashi wrote: post #65

Earlier quoted context omitted.

1.6B in revenue is pretty meaningless if you're not even making a profit. They are simply really good at losing a lot of money.

It's "scary" and "even" dangerous one may say, but not meaningless.

You are correct, it's not meaningless, I should have said: Simply having revenue isn't a defense for a company if they are spending more money than they are bringing in.

Re: Groupon stock sinks to new low, investors sue

#119

Post by ohashi » Wed, Apr 04, 2012, 9:23 PM UTC

pbreit wrote: post #108

ohashi wrote: post #65

Earlier quoted context omitted.

1.6B in revenue is pretty meaningless if you're not even making a profit. They are simply really good at losing a lot of money.

Revenues are generally as important or more than profits for a company at Groupon's stage (ie, young, high growth). Since its primary expenses are sales and marketing, it's easy to envision how such a growth machine could become wildly profitable (hence the $9.4b market value).

It seems like imagination is about all they are running on. I would accept the idea that growth could be more important for some companies at an early stage. However, I don't think it's applicable to groupon's situation.

Re: Groupon stock sinks to new low, investors sue

#120

Post by zaidf » Wed, Apr 04, 2012, 9:31 PM UTC

ohashi wrote: post #119

pbreit wrote: post #108

Earlier quoted context omitted.

Revenues are generally as important or more than profits for a company at Groupon's stage (ie, young, high growth). Since its primary expenses are sales and marketing, it's easy to envision how such a growth machine could become wildly profitable (hence the $9.4b market value).

It seems like imagination is about all they are running on. I would accept the idea that growth could be more important for some companies at an early stage. However, I don't think it's applicable to groupon's situation.

However, I don't think it's applicable to groupon's situation

That is debatable. Consider this: Amazon started off just selling books, today they are gunning for Walmart. At the time, people raised similar objections and Amazon took heat for years for remaining unprofitable. No one is complaining today.

Similarly, I see Groupon's deals business as just one product. There are signs from their recent aquisitions that they might diversify with new products targeted at the same small businesses(such as credit card processing).

Now, just because it all ended well for Amazon doesn't mean the same will happen for Groupon. I am just pointing out that it is not a foreign strategy to prefer growth over profitability for many years after the IPO.