On Grouponzi
—via parislemon:caterpillarcowboy
While I have an account, I’ve never actually used Groupon. And I may never use Groupon. It’s just not really my thing. But the massive backlash following the company’s S-1 filing (so they can IPO) strikes me as a bit odd. The fast rising consensus now in certain tech circles is that Groupon is essentially a Ponzi scheme (Grouponzi, FTW). The fact that their net income is is well underwater (and going deeper) has everyone freaking out. As does the fact that some of the original investors (as well as founders) took hundreds of millions off the table in the last huge round. But I’m more with Joe Stump on this. You cannot overlook the fact that they’re also making hundreds of millions of dollars each quarter now. The run-rate for this year could be over $3 billion. Gonna disagree here. Consider this graph: and this graph: Customer acquisition costs are going up over time, not down, because the deep pocketed competition is massively bidding up ad CPC’s. Furthermore, the explosion in deal selection combined with the fact that consumer’s budgets are staying the same means that the average revenue per merchant is going down. Put in other words, there are no economies of scale here — smaller Groupon clones actually have an advantage because they can promise more deals sold per merchant than Groupon can. Groupon is expanding internationally because they are strip mining existing cities. In a couple years, their revenue per major US city will be a fraction of what it is today. vruz: is there a very large number of small business with big margins willing to slash down those margins and sell their stuff on the very cheap in order to be marketed in Groupon spam and Google ads, to the tune of billions of dollars yearly, forever and ever? maybe it’s me but I’ve never been anything but skeptical about the prospects for a certain glorious future for Groupon.
