Groupon shares fall as merchants cut back on deals

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2012/01/05/BUJ61MKQ2A.DTL&type=tech

by FluidDjango • 15 years ago

55 28 15 years ago

sfgate.com

ianferrel• 15 years ago

"Groupon, in fact, said in a June IPO filing that offering merchants more favorable terms may cut into its profits."

Does Groupon actually have any profits, or do they really mean "exacerbate its losses"?

tsantero3• 15 years ago

We increased our revenue from $1.2 million in the second quarter of 2009 to $430.2 million in the third quarter of 2011. We generated these revenues from gross billings of $3.3 million for the second quarter of 2009 as compared to gross billings of $1,157.2 million for the third quarter of 2011. We had net income of $21,000 for the second quarter of 2009 as compared to a net loss of $10.6 million for the third quarter of 2011.

Source: Groupon, Inc. Form 424B4 Prospectus (http://investor.groupon.com/secfiling.cfm?filingID=1047469-1...)

Edit: So to answer your question, exacerbate its losses.

leak3• 15 years ago

Amazing to me how a company can gross $1.1B and end up at a loss at the end of that. Almost feels pointless.

sliverstorm• 15 years ago

I like how they focus on the revenues, as if to try and distract from the nets.

waterside812• 15 years ago

Exactly what we've seen. Our first Groupon was at a 50/50 split, no exceptions, no wiggle room. Our latest was at 70/30 in our favour.

tsantero3• 15 years ago

Was it a difficult negotiation?

dcpdx2• 15 years ago

I can't imagine that it was. Having worked at a deals startup myself and spoken with many business owners who have done Groupon/LS, all they have to tell the company is "Well [insert competitor here] is giving me 70/30". They'd rather lower their commission than walk away from the deal. This will be a slow race to the bottom, although I'm encouraged to see Groupon experimenting with loyalty and analytics components. Regardless of popular sentiment, the SMB space has been underserved for awhile now and if they do figure out how to make it work, then they'll own local. I wouldn't count them out just yet.

waterside812• 15 years ago

Not in the least. They, and other daily deal sites, will take whatever they can get.

gallerytungsten• 15 years ago

The "daily deal" space is rapidly being turned into a commodity service. I'd expect the splits to become even more favorable for merchants. How low can it go? Probably all the way to 10% or less for Groupon.

AznHisoka• 15 years ago

Yup, and the lower the discount, the less excited the customers. Groupon is example of there being no free lunch.

Of course you can make customers happy.. anyone can.. just give stuff for free or 50% off, but how do you create value without giving it away? Groupon has no answer for that

robryan• 15 years ago

Which they seem to be nowhere near efficient enough in closing sales to local business to make money at that rate. Maybe eventually after every local business has been introduced to the concept if it really has legs it will become self service.

r00fus• 15 years ago

A point I make again and again is: how will Groupon compete against copycats, large players and niche-specific versions of it's service?

So far the only thing I've heard is crickets... Groupon as a service is a great idea, as a stock, GRPN is overpriced.

sunchild• 15 years ago

That's the "race to the bottom" effect in a market with low barriers to entry.

Groupon's business is compiling and maintaining two lists: (1) a list of local businesses, and (2) a list of email subscribers.

How it took billions of dollars and tens of thousands of employees to compile those lists, I will never understand. I still cringe every time I hear people promising that the "local market" will be "HUGE".

leak3• 15 years ago

Here is my take on the whole Groupon thing. Every small business should give customers, especially first time customers, a discount. We used to print in the local news paper "buy 1 get 1 free ciagar" specials and pay the paper $250 for that ad. It wasn't really worth it but we did it every month because our competitor was doing it.

This is what I see is happening with a lot of small businesses. I don't think the issue is really Groupon so much as it is the businesses not understanding what to do with these new customers. If they're just in there for the deal, they won't come back after they get the deal. This is from first hand experience.

We got customers coming back because the deal was just to bring them in. That was all. It wasn't even to find new customers. We just wanted traffic. Once we got the customers, each of us who worked there had a responsibility to get the customers excited about coming back. We were masters at it. These small business lack that skill and it has nothing to do with Groupon or any other deal advertising platform (including newspapers).

DanBC2• 15 years ago

I go to Starbucks every single morning. I buy a cup of coffee, and something to eat. I tip. I'm polite and friendly; I don't leave a mess and I don't leach too much wifi.

One morning I get there and there's a long queue. People don't know what they're doing - they're taking ages looking at the menu and choosing drinks and trying to order them and arguing over the drinks they're eventually given. And they all get a pack of beans, ground to how they like. And then I notice that they're handing in a coupon from a newspaper.

So: I don't get free stuff; I do get worse service; staff get a bunch of rude people who are only after the free beans. I was grumpy. Staff were grumpy.

leak3• 15 years ago

Customers don't care about "free stuff" or even prices. They care about service. This is my point. GroupOn may help bring in the customers with the coupons but customers don't go back because of prices (not so much). If the experience sucks, it sucks and that's it.

darksaga• 15 years ago

This is another company which is going to die a slow, painful death. I think the overall consensus is they're done, but they continue to plod along, losing money as they go.

They can only continue to churn their losses for so long. At some point, it's going to go from a slow drain to a quick exit. I'd keep an eye for them buying their stock back and layoffs.

rajpaul• 15 years ago

did the ipo turn out to be a better payout than google offered them?

awakeasleep• 15 years ago

Thats hard to say, because I don't know what google was really going to buy. 51% of the company for 6 billion? Or were they going to acquire everything?

Right now I believe Groupon's valuation is around 25 billion, but they only offered something like 10% of their shares for public bidding.

linuxhansl• 15 years ago

Everybody who bought Groupon shares deserves to loose some money. The writing was on the wall.

Some financial institutions tried to sell Groupon as a great thing (and they probably taken their profits and ran).

Groupon shares fall as merchants cut back on deals

Related Stories