The rise of the “successful” unsustainable company • Hacker News Board

Re: The rise of the “successful” unsustainable company

#31

Post by Retric » Tue, Oct 23, 2012, 5:44 PM UTC

megablast wrote: post #19

TeMPOraL wrote: post #18

Earlier quoted context omitted.

GroupOn had also this ridiculous idea that small businesses can earn return customers by offering them extremely huge discounts.

If you look at it as a form of advertising, it is a great idea. And I am sure there are a number of returning customers.

I suspect the real problem was the size of their discounts. Selling a 40$ bottle of wine wine for 20$ attracts far more people that buy 20$ wine than people who buy 40$ wine. So unless you can afford to keep selling at 20$ the odds of repeat bushiness is low.

Really when it comes to coupons there are three options that actually work. You can always have a sale, you can make it a pain to use, or you can limit yourself to 10 to 15% off.

Re: The rise of the “successful” unsustainable company

#32

Post by rndmize » Tue, Oct 23, 2012, 5:53 PM UTC

cs702 wrote: post #21

Interestingly, Mark Pincus, who was Nguyen's co-founder in two of the 'pump-and-dump' schemes listed in the article (Freeloader and Support.com)[1], seems to be on an eerily similar path with Zynga.[2] -- [1] http://en.wikipedia.org/wiki/Mark_Pincus [2] http://www.forbes.com/sites/nathanvardi/2012/10/05/zynga-kee...

Some details on Freeloader can be found here - http://www.inc.com/magazine/19980515/1128.html (1998)

Re: The rise of the “successful” unsustainable company

#33

Post by drumdance » Tue, Oct 23, 2012, 5:55 PM UTC

api wrote: post #2

This is diplomatic and charitable. When I see a repeat pattern of GroupOn and Zynga type companies I see someone who knows how to pump and dump. It's not quite fraud but it's getting close, given how loose these sorts of people typically play the truth.

I think Groupon was/is overvalued, but I also think they can deliver value beyond leads. I believe they already offer a booking service, and they should be offering opt-in email, social management services, and other services that SMBs have already shown they will pay for.

They may have grown too fast to do it under the Wall St microscope though.

Re: The rise of the “successful” unsustainable company

#34

Post by enraged_camel » Tue, Oct 23, 2012, 6:03 PM UTC

danso wrote: post #7

api wrote: post #2

This is diplomatic and charitable. When I see a repeat pattern of GroupOn and Zynga type companies I see someone who knows how to pump and dump. It's not quite fraud but it's getting close, given how loose these sorts of people typically play the truth.

I have to strongly disagree with comparing Groupon to any of the OP's failed examples. Groupon may well run into the ground, but consider that: a) It was the first big success in its space b) at its peak, hired dozens (hundreds?) of actual employees, even copywriters from journalistic institutions. c) Had a huge, huge base of customers Groupon's leaders should be faulted for the various strategies and actions that ha…

>>It was the first big success in its space

Success that is not sustainable is not success.

>>and a lot if its downfall comes from how easy it is to copycat it.

No, I don't think so. The real (and perhaps the only) reason Groupon is not sustainable is because the fundamental assumption that the business model rests on turned out to be false. Let me explain.

The original idea was that Groupon would team up with a business and provide deep discounts to consumers to encourage them to try out that business. The assumption, which Groupon's sales folks used aggressively to push sales, was that a significant portion of those consumers would like the business so much that they would become repeat customers, thereby (in the long run) offsetting the cost of the original discount. In the end, the business would turn a profit.

Except it didn't work that way.

What ended up happening instead is that the vast majority of consumers never actually went back to the business. The reason is simple: while they could justify paying X dollars for the business's product or service just to try it out, they couldn't justify paying X times three or four. Because of this, most Groupon clients (the businesses) end up losing money, and never offer a second or third discount via GroupOn.

This is why GroupOn has such a huge number of sales reps: they need an ever increasing number of clients in order to postpone the inevitable sinking of the ship.

Re: The rise of the “successful” unsustainable company

#35

Post by hammock » Tue, Oct 23, 2012, 6:11 PM UTC

Why does this idea exist that every company needs to be sustainable? Is it not the natural way of markets that 1) an opportunity is identified, 2) exploited for profit, until 3) competition drives profitability away?

So long as capital stays productive, from a societal point of view it shouldn't matter whether it stays in one company for 20 years or moves from company to company every three.

Re: The rise of the “successful” unsustainable company

#36

Post by roc » Tue, Oct 23, 2012, 6:15 PM UTC

drumdance wrote: post #33

api wrote: post #2

This is diplomatic and charitable. When I see a repeat pattern of GroupOn and Zynga type companies I see someone who knows how to pump and dump. It's not quite fraud but it's getting close, given how loose these sorts of people typically play the truth.

I think Groupon was/is overvalued, but I also think they can deliver value beyond leads. I believe they already offer a booking service, and they should be offering opt-in email, social management services, and other services that SMBs have already shown they will pay for. They may have grown too fast to do it under the Wall St microscope though.

That's like saying Pets.com could have worked out -- given how readily people took to buying pet meds, food and accessories over the internet -- if only they hadn't grown so fast.

Growing so fast is not only a problem of expectation, it's a problem of massive overhead that competitors don't have. That's going to harm their competitiveness in anything they do.

Re: The rise of the “successful” unsustainable company

#37

Post by [deleted] » Tue, Oct 23, 2012, 6:24 PM UTC

api wrote: post #2

This is diplomatic and charitable. When I see a repeat pattern of GroupOn and Zynga type companies I see someone who knows how to pump and dump. It's not quite fraud but it's getting close, given how loose these sorts of people typically play the truth.

[deleted]

Re: The rise of the “successful” unsustainable company

#38

Post by nicholassmith » Tue, Oct 23, 2012, 6:32 PM UTC

grey-area wrote: post #22

nicholassmith wrote: post #13

Unfortunately it seems like a lot of the time people are building companies for exits, rather than long term products. There's exceptions of course, but how much of that is now the expectation that to get the funding to do something you've got to be aiming for $xm dollars at exit. I've got no problems with people exiting like that, but it makes me wonder where all the pressure to sell up and move on comes from.

I've got no problems with people exiting like that, but it makes me wonder where all the pressure to sell up and move on comes from. The pressure often comes from the VCs who put a lot of money down in an initial investment, and need at least some of their bets to pay off within a short time-frame. Are there any long-term VC funds which accept stock and then wait for dividends?

I'm not sure, I can see it from the VC point of wanting to return on investment as fast as possible. It does seem like it creates an industry based on ship it, sell it.

Re: The rise of the “successful” unsustainable company

#39

Post by hkmurakami » Tue, Oct 23, 2012, 6:34 PM UTC

antr wrote: post #4

api wrote: post #2

This is diplomatic and charitable. When I see a repeat pattern of GroupOn and Zynga type companies I see someone who knows how to pump and dump. It's not quite fraud but it's getting close, given how loose these sorts of people typically play the truth.

Agree on GroupOn and Zynga, and there are still plenty of popular services which are far from being economically sustainable and yet everybody says what a "great company" that is, when in reality all it is is a "great product/service" with no revenue proposition (still, kudos for building it). See Path, Foursquare, Turntable.fm, Tumblr, etc. If the liquidity from large companies such as FB, Google, AOL, Yahoo, etc. d…

>See Path, Foursquare, Turntable.fm, Tumblr, etc.

Gasp How could you forget Quora! :)

Re: The rise of the “successful” unsustainable company

#40

Post by hkmurakami » Tue, Oct 23, 2012, 6:38 PM UTC

antr wrote: post #11

danso wrote: post #7

Earlier quoted context omitted.

I have to strongly disagree with comparing Groupon to any of the OP's failed examples. Groupon may well run into the ground, but consider that: a) It was the first big success in its space b) at its peak, hired dozens (hundreds?) of actual employees, even copywriters from journalistic institutions. c) Had a huge, huge base of customers Groupon's leaders should be faulted for the various strategies and actions that ha…

Success? GroupOn isn't profitable, it hasn't even returned via income the equity invested + accumulated losses. Anyone can hire tonnes of people, pay them, provide a service/product, and still deliver negative equity returns. Anyone.

>Anyone can hire tonnes of people, pay them, provide a service/product, and still deliver negative equity returns. Anyone.

Well I don't think anyone can successfully pitch investors and take millions of dollars of their hard earned (sometimes) money, but agreed on the other points.