Analysts: Groupon May Be Falling Fast

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Daily deals giant Groupon has seen a sharp decline in its stock value as questions about the company’s finances mount, according to a report by MSNBC.

After reports of “accounting errors” surfaced, the SEC has initated a review of Groupon’s financial results that were posted after the company went public.

Jordan Rohan, senior analyst at Stifel Nicolaus, projects that the company could be facing a rough road forward.

“This is a business model where [the company] is making it up or proceeding along a plan as we are following them as a public company. [I am concerned] that if the addressable market isn’t as big as they say it was, we will find that out in an unglamorous fashion over the next few years.”

Additionally, reDesign principle analyst Rakesh Agrawal believes the problem lies within Groupon’s business model, which he calls “fundamentally flawed.”

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Maxim: Wherever profits abound ruinous competition will arise.
Update April 17: Here's a new local player...Facebook!
http://finance.yahoo.com/news/facebo...110000391.html
#analysts #falling #fast #groupon
  • Profile picture of the author MonteMichaels
    There are a good any business models that are "fundamentally flawed". I am sure that Groupon is aware of it themselves and will probably adapt to make sure that they are still in business in the future. Right now they are the big dogs in that segment, and it is always easier to write about how they are going to fail.

    I read an article the other day about Google dropping Android. It was using theory and had no facts whatsoever. You see these articles all over the place.


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  • Profile picture of the author Aaron Doud
    Groupon's problem is the problem with a lot of startups. There is so much angel and venture cash out there that they never have to be profitable.

    Real businesses know they can't run at a loss forever and smart start ups have a plan from day one to be profitable.

    Groupon's problem is they are a large and IMO mature business. And they still don't have a profitable model. That is scary when small groupon clones can be profitable from day one bootstraping. That tells me that the company culture is flawed. They care only about sales and not profits.

    Investors need to hold starts up accountable for profits. But they just see IPO or takeover as a way to cash out.
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    • Profile picture of the author iAmNameLess
      Originally Posted by Aaron Doud View Post

      Groupon's problem is the problem with a lot of startups. There is so much angel and venture cash out there that they never have to be profitable.

      Real businesses know they can't run at a loss forever and smart start ups have a plan from day one to be profitable.

      Groupon's problem is they are a large and IMO mature business. And they still don't have a profitable model. That is scary when small groupon clones can be profitable from day one bootstraping. That tells me that the company culture is flawed. They care only about sales and not profits.

      Investors need to hold starts up accountable for profits. But they just see IPO or takeover as a way to cash out.
      Well, many angels or VC's out there aren't providing cash as a loan, but buying equity in the company. A lot of these companies are better at going for investments than they are actually making the business profitable.

      I think the main problem of groupon... is misleading stockholders, having an investigation by the SEC, and being SUED by its' stockholders. LOL.
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  • Profile picture of the author Huskerdarren
    The space is profitable, but Groupon cannot be the run away leader. Their business is being eroded by Amazon Local, Google Offers, Living Social, YP daily deals and local city newspaper offers. It's crowded and they left a lot of businesses disgruntled with the results.
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  • Profile picture of the author bnicoletti82
    Heavy is the head that wears the crown.

    Getting into vacations and high-ticket packages is going to be the end of Groupon. The best market for them in my opinion is to partner with sites like Orbitz or Priceline, and automatically provide offers to travelers for the length of their stay.
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  • Profile picture of the author Aaron Doud
    NameLess I agree. We have build a culture in tech start ups that you focus on getting investors. Profits are secondary or not needed. Because once you get big enough you will have an IPO or get bought by a larger company. That is how you and the investors will cash out.

    Investors make money this way but they are not growing long term companies. It's a clear issue with our current investing environment. We have learned to focus on short term gains vs. building profitable long term companies.

    For the small investor on wal street these companies are toxic. Investing in a company that is large and not not make a profit is dangerous because it shows the business itself is flawed. A business the size of groupon should be profitable on economics of scale alone.
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  • Profile picture of the author mikelukjaniec
    Thanks for the tip Centurian. One of the companies I'm associated with has partnered with Groupon, so I'll put your points to them.
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  • Profile picture of the author Eddie Spangler
    I know in our local market there has been no more than 5 "local" deals so far in 2012.
    Guess the word got out or they are just not calling local biz owners around here., 250-300k metro area.
    Also the local paper(gannett), radio stations(cumulus+clearwater), and tv (raycom) have been pushing daily deals pretty heavily.
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  • Profile picture of the author Mobile Tactics
    I would think at some point you run out of businesses that are excited to discount their prices at such a heavy discount.
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  • Profile picture of the author commercee
    I read that today in the Wall Street Journal. The company doesn't want to give out any Consumer Data to their Investors. The business model isn't working and there has been little success as of late when it comes to Local Coupon Redemption.
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  • Profile picture of the author misterme
    I contacted them a couple of times, the first time asking them to call me about a deal idea I had and they simply wrote back saying they weren't interested in me doing a deal just based on what industry I'm in, even though they didn't know what I had in mind in particular to do, because it didn't have anything to do with my industry at all.

    And the second time I contacted them they wrote back saying they were set for my area, didn't need more deals, even though the address I gave them wasn't in the area I wanted to do a deal in. Calling them doesn't get a call returned either.

    What that signifies to me is what I think Warren Buffet calls "backyard analysis" or something like that, where you see first hand how a business operates and so you just know by what you experience that they're on the path to going down.



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  • Profile picture of the author KateStevensB
    Bad news about Groupon indeed...
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  • Profile picture of the author Aaron Doud
    misterme: Those are classic examples of a company that just doesn't care.
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    • Profile picture of the author NewParadigm
      The model can work, it can be cash flow positive. Groupon has terrible management. How did they go through the IPO due diligence and avoid these problems? There is some fraud there. The model can be tweaked and become profitable. The management has failed and should be replaced.
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  • Profile picture of the author bizadpros
    I have used several Groupons and most deals are great for the customer - but horrible for the business owner.

    These business owners think they are getting a great way to get customers and traffic...they are, but a what cost???

    We are all marketers and know that the secret to our success is IN THE LIST!

    Who has the list of the purchases of a businesses Groupon deal - Groupon does!

    Who gets a 50% take on all Groupon sales by consumers - Groupon does!

    What is amazing is the fact that Groupon is losing so much money.

    Further, what is really a shame is the business owners are even losing more...They have just discounted their product at least 50% with a Groupon...and further, they are only collecting 50% of the "prepaid" coupon that the customer is using.

    Sadly, business owners continue to like Groupons, and have not trained their staff and what the real game is about:

    "upselling and getting that customer to come back or spend more"...
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  • Profile picture of the author Aussieguy
    Heaps of people on here point out how much of a bad deal a groupon is for the business owners.
    Yet many on here will at the same time (with text message marketing and the like) encourage their clients to give away fantastic deals(!)

    A business that decides to use groupon (or similar) can plan & work to make it a successful campaign, or can simply "run a groupon" and hope for the best. Using coupons, daily deals, groupons etc. can be a part of a business' marketing plan, the same as a loss leader at your local store.

    A marketing consultant recently posted in his newsletter that he was claiming a groupon at some place (food place from memory) and got another follow up coupon (from the business itself). That's a business using groupon to get the initial lead.
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    • Profile picture of the author jrobconsult
      Originally Posted by Aussieguy View Post

      Heaps of people on here point out how much of a bad deal a groupon is for the business owners.
      Yet many on here will at the same time (with text message marketing and the like) encourage their clients to give away fantastic deals(!)

      A business that decides to use groupon (or similar) can plan & work to make it a successful campaign, or can simply "run a groupon" and hope for the best. Using coupons, daily deals, groupons etc. can be a part of a business' marketing plan, the same as a loss leader at your local store.

      A marketing consultant recently posted in his newsletter that he was claiming a groupon at some place (food place from memory) and got another follow up coupon (from the business itself). That's a business using groupon to get the initial lead.
      The problem with most businesses using Groupon or another daily deal site is that they do not try to capture contact info or follow up. My wife has bought dozens of these and not one business have ever follow up afterwards. The businesses don't realize that is where the money is.
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  • Profile picture of the author Rus Sells
    The flaw really isn't with Groupon per say.

    We all know that the business owners don't in many cases capture all these hungry deal seekers and re-market to them, most of the time they don't even offer an upsell or related product at the time of sale minimizing their cut in profits from the Groupon deal.

    The flaw with Groupon is they are greedy and don't educate the small business on this very important fact because they don't want the business owner figuring this part of the equation out. When they do they only need run enough "deals" to skyrocket their client base and then they won't need Groupon any longer.

    What Groupon needs to do is set something up where they can make extra coin on this aspect and help their clients re-market to all these new deal seekers.
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    • Profile picture of the author Lee M
      Originally Posted by Rus Sells View Post

      The flaw really isn't with Groupon per say.

      We all know that the business owners don't in many cases capture all these hungry deal seekers and re-market to them, most of the time they don't even offer an upsell or related product at the time of sale minimizing their cut in profits from the Groupon deal.
      Well said. And for PROOF - just ask yourself how many times have you gone into any restaurant, bar, retail store, dry cleaner, etc... and they NEVER try to capture your contact details for further marketing! Why? Simple. They are more interested in trying to get a NEW customer.

      Also agree, with the success that Groupon has had ... instead of employing a 'one-and-done' mentality with businesses ... why not leverage that relationship and offer the business a 'back-end' customer loyalty system tied into their program! It's mind boggling.

      Lee
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  • Profile picture of the author lukewatson1
    Thanks a lot friends for sharing your useful tips and suggestions i really appreciate it..
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  • Profile picture of the author ShawnSells
    I have a client who used Groupon and was very disappointed. It's starts out sounding like a great deal for the business, but it's often not the case. The customers can get a steal at the better restaurants, but the owners are left trying to recoup their costs. I'm betting as more businesses tell others, Groupon's market is drying up.
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    • Profile picture of the author electronik69
      Originally Posted by ShawnSells View Post

      I have a client who used Groupon and was very disappointed. It's starts out sounding like a great deal for the business, but it's often not the case. The customers can get a steal at the better restaurants, but the owners are left trying to recoup their costs. I'm betting as more businesses tell others, Groupon's market is drying up.
      That is purely your clients fault, if he or she is to stupid to think that customers are going to keep coming back to their business on service alone they have another thing coming Groupon and other sites like it gives business owners an opportunity to buy a customer now it depends what the business owner does with that customer.

      A good example is my mother she loves buying these group deals and one day I asked her "Hey Mum have any of those businesses contacted you about doing further business or attempted to sell you on monthly continuity or upsell any products?" she said none of them had.

      And then businesses have the nerve to say Groupon doesn't work they just rip you off all marketing doesn't work if you don't have the right strategy.

      I apologise if I sound like a Groupon fanboy but I just get annoyed when I see posts like this.

      On Groupon failing they should of let Google buy them out back in 2010 greedy *******s...
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  • Profile picture of the author Virtualghost
    A while ago watched a program that where Groupon was the focus of most of the show.For you as a business when you are using them can not make money from initial groupon sales but can only hope for return business.They squeeze you to the point they are making money and consumer is saving but you offering the service or product get well below your costs and no profit.Most do it for return business or the association of being part of groupon.They show their office with the many and I mean many in their sales team grinding the business and a few business owners they talked to said they were near broke from offers.As groupon was a success but the supplies needed to fulfill customers orders at a little to zero profit nearly wiped them out.Just google this.
    groupon cost business lose money
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  • Profile picture of the author FormerWageSlave
    I *love* that Groupon is failing. Love it.

    That is all.
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    grrr...

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  • Profile picture of the author xlfutur1
    The guy should have taken Google's $6 billion offer back in Dec of 2010. Why would anyone in their right mind turn down a $6 billion payout? It was a great idea, but if so many business owners are getting hosed by doing Groupons, eventually business will dry up. I wouldn't be surprised if they go out of business in 1-2 years.
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    • Profile picture of the author kolbywhite28
      Originally Posted by xlfutur1 View Post

      The guy should have taken Google's $6 billion offer back in Dec of 2010. Why would anyone in their right mind turn down a $6 billion payout? It was a great idea, but if so many business owners are getting hosed by doing Groupons, eventually business will dry up. I wouldn't be surprised if they go out of business in 1-2 years.
      Well kinda obvious. If they had foreseen their business falling apart, you'd think they will not take up the offer?
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  • Profile picture of the author Huskerdarren
    a lot of people saw that things could go badly for them. Once other major, well capitalized companies jumped into the arena, it was going to be much tougher for them to keep increasing sales. There's nothing unique about Groupon. Their business is easily replicated.
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    • Profile picture of the author kolbywhite28
      Originally Posted by Huskerdarren View Post

      a lot of people saw that things could go badly for them. Once other major, well capitalized companies jumped into the arena, it was going to be much tougher for them to keep increasing sales. There's nothing unique about Groupon. Their business is easily replicated.
      Same can be said of Facebook.
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