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Groupon Buys LivingSocial, a Rival Once Valued at $6B

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Re: Groupon Buys LivingSocial, a Rival Once Valued at $6B

#11

Post by fullshark »

pchristensen wrote: post #7

I worked at Groupon from 2010-2012. I realized that a lot of the problem with the daily deal industry was that a) there was only going to be one winner, because of network effects, and b) no one knew how big the prize would be for being the winner, so it was not clear how much $$ to raise or spend to make it worth it. It doesn't matter how much you spend on a war if you lose.

I think the big problem is that it was a bad deal for most vendors except for very high margin ones. When places like restaurants realized that it wasn't getting them repeat business and the deals were dominated by stuff like Day spas it kind of collapsed.

Re: Groupon Buys LivingSocial, a Rival Once Valued at $6B

#12

Post by ghaff »

princetontiger wrote: post #10
JonFish85 wrote: post #8

Earlier quoted context omitted.

The money they raised in their IPO gave them a very long runway. As of a year ago or so they had just over a $1B cash on hand.

People forget that companies like Groupon and Zynga are still real businesses. Both are still $1B+ market caps. As someone who went to both IPO lunches, it was a wild time. Throw Renren, and several other companies from that time period into the mix. 2012 was almost 5 years ago. Unbelievable. Well, at least tech companies actually did go public.

To add another one, Linden Lab (Second Life) is still around too. Though it's not in that range--brings in about $60M/year [1] Certainly not the revolutionary thing it was going to be once but the shocking part is that it exists at all.

[1] http://www.zdnet.com/article/second-life-lessons-what-linden...

Re: Groupon Buys LivingSocial, a Rival Once Valued at $6B

#13

Post by eric_h »

JonFish85 wrote: post #9
pchristensen wrote: post #7

I worked at Groupon from 2010-2012. I realized that a lot of the problem with the daily deal industry was that a) there was only going to be one winner, because of network effects, and b) no one knew how big the prize would be for being the winner, so it was not clear how much $$ to raise or spend to make it worth it. It doesn't matter how much you spend on a war if you lose.

In regards to the first point, who won? Groupon the company got a ton of cash but man they're in rough shape these days. They're not even really in the same business space either.

I don't even know what they do these days. I had an ex who was into buying daily deals, and literally every single small business where we redeemed one did not like the deal they got from groupon one bit.

Re: Groupon Buys LivingSocial, a Rival Once Valued at $6B

#14

Post by mountaineer22 »

ghaff wrote: post #12
princetontiger wrote: post #10

Earlier quoted context omitted.

People forget that companies like Groupon and Zynga are still real businesses. Both are still $1B+ market caps. As someone who went to both IPO lunches, it was a wild time. Throw Renren, and several other companies from that time period into the mix. 2012 was almost 5 years ago. Unbelievable. Well, at least tech companies actually did go public.

To add another one, Linden Lab (Second Life) is still around too. Though it's not in that range--brings in about $60M/year [1] Certainly not the revolutionary thing it was going to be once but the shocking part is that it exists at all. [1] http://www.zdnet.com/article/second-life-lessons-what-linden...

Is that 60 million in Linden or US currency?

Seriously, though, they could have a renaissance with the next AR/VR round.

Re: Groupon Buys LivingSocial, a Rival Once Valued at $6B

#16

Post by jacquesm »

downandout wrote: post #15

Does anyone know what the threshold for an "immaterial" transaction is in the case of Groupon? I'm trying to at least get a sense of the price.

There is no absolute threshold it is more a matter of whether or not you could argue that your decisions would have been different had you known about it.

That leaves a lot of legal wiggle room.

Re: Groupon Buys LivingSocial, a Rival Once Valued at $6B

#17

Post by dmerrick »

Back in 2010 I worked at a startup that ended up pivoting to a regional Groupon clone. It seemed like a good idea at the time, but the company ended up going under a year later.

What I remember most vividly was trying to come up with a good name. LivingSocial was starting to get traction and we wanted to differentiate ourselves from them. The conversation went like:

    Boss: What's the opposite of LivingSocial?
    Me: I dunno, DyingAlone?

Re: Groupon Buys LivingSocial, a Rival Once Valued at $6B

#18

Post by noodle »

fullshark wrote: post #11
pchristensen wrote: post #7

I worked at Groupon from 2010-2012. I realized that a lot of the problem with the daily deal industry was that a) there was only going to be one winner, because of network effects, and b) no one knew how big the prize would be for being the winner, so it was not clear how much $$ to raise or spend to make it worth it. It doesn't matter how much you spend on a war if you lose.

I think the big problem is that it was a bad deal for most vendors except for very high margin ones. When places like restaurants realized that it wasn't getting them repeat business and the deals were dominated by stuff like Day spas it kind of collapsed.

Yeah, I've run high margin deals before and even those aren't really worthwhile. For it to be successful you have to be fairly sophisticated with your methodology, and most small business owners (the people who tend to use Groupon the most) just aren't that sophisticated in their setup.

Re: Groupon Buys LivingSocial, a Rival Once Valued at $6B

#19

Post by downandout »

jacquesm wrote: post #16
downandout wrote: post #15

Does anyone know what the threshold for an "immaterial" transaction is in the case of Groupon? I'm trying to at least get a sense of the price.

There is no absolute threshold it is more a matter of whether or not you could argue that your decisions would have been different had you known about it. That leaves a lot of legal wiggle room.

Well but I think the rule that most companies generally use is if it's under 5% of assets. That's why I was asking.

Re: Groupon Buys LivingSocial, a Rival Once Valued at $6B

#20

Post by jamestnz »

fullshark wrote: post #11
pchristensen wrote: post #7

I worked at Groupon from 2010-2012. I realized that a lot of the problem with the daily deal industry was that a) there was only going to be one winner, because of network effects, and b) no one knew how big the prize would be for being the winner, so it was not clear how much $$ to raise or spend to make it worth it. It doesn't matter how much you spend on a war if you lose.

I think the big problem is that it was a bad deal for most vendors except for very high margin ones. When places like restaurants realized that it wasn't getting them repeat business and the deals were dominated by stuff like Day spas it kind of collapsed.

I agree, it's probably a terrible deal for almost every retailer, especially small businesses.

As I recall, the standard deal with Groupon etc is 50% off retail price, then Groupon (or whoever) takes 50% of what's left.

So consider a product or service you usually sell for $100, which costs you $40 to deliver. When doing one of these deals, you're now selling it for $50. You get $25 of that, and the platform operator keeps the other $25. So your cost of sales was $40 and your revenues were $25.

Fine if you're happy to operate a loss-leader to attract quality clients who will return to you at full price later.

Unfortunately it seems that these daily-deal services often attract low-quality leads to your business. The kind of customer who exhibits no loyalty, and simply surfs from company to company taking advantage of these loss-leader deals, then never returning.

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