BUSTED: Groupon And Living Social Caught Inflating Regular Prices To Make Deals Look Better. Groupon and LivingSocial succeed because consumers perceive them as great deals. But is that true? Perhaps not. Thumbtack.com called 10 vendors offering daily deals (five from Groupon and five from LivingSocial) and found eight instances where they were quoted a price over the phone that was cheaper than the advertised regular price being offered.
All five of Groupon's prices were higher than the same merchant's price when called, and three of the LivingSocial ones were. Granted, this is an extremely small sample size, but it is worth noting. Some of the most egregious examples from the Thumbtack.com post: On August 24, 2011, Groupon offered carpet cleaning for a 200 sq. ft. room in San Francisco for $45, a discount of 78% from the regular price of $200. Groupon Was “The Single Worst Decision I Have Ever Made As A Business Owner” Editor’s note:This guest post was written by Rocky Agrawal, an entrepreneur who has worked on local products since 1995. He blogs at reDesign and Tweets @rakeshlobster. “How much is your average sale here?”
“It’s about five dollars.” That one question told me Jessie Burke had been sold an unsuitable product. Her average sale was $5 and her Groupon rep had convinced her to run a Groupon for $13. I already knew how the story ended. I wanted to drill deeper and get at the why. Part 1 – Part 2 – Part 3 – Part 4 – Part 5 Some of the key takeaways: Jessie found about Groupon from a friend who saw that the pizza place across the street was full after running a Groupon. One of the things I’ve really struggled with in writing this is the potential for readers to view Jessie as ignorant or worse by the Silicon Valley elite. That couldn’t be farther from the truth. She tried reading through Groupon’s merchant agreement, but it had too much legalese for her to understand. A Groupon rep called last week. Groupon Responds To IPO Backlash With A Cheeky Feline.
If you’ve been following TechCrunch and the tech press at large in the weeks since Groupon filed its S-1, you’ve probably come across quite a few articles criticizing the company. Groupon may, according to various posts, violate consumer protection laws, implode, get pwned in China, and lead to bouts of temporary insanity over the coming months. Booo! You may have also noticed that Groupon hasn’t done a whole lot to denounce any of these claims (they still haven’t gotten back to me on whether the service causes numbness in the toes). And for good reason: the company is currently in a ‘Quiet Period’ mandated by the SEC, during which there are restrictions on what it can say in public statements.
But that doesn’t mean they can’t fight back, just a little. Today in a post on its official blog, Groupon’s spokescat (appropriately named Groupon the Cat) has penned a witty rebuttal outlining the “hazing ritiuals” companies must go through en route to their IPOs. Some of the main points: Groupon's accounting practices under SEC scrutiny. July 27, 2011, 3:51 PM — Andrew Mason of Groupon accepts the Breakout of the Year award during the 15th annual Webby Awards in New York June 13, 2011. REUTERS/Lucas Jackson The Securities and Exchange Commission is asking online discount site Groupon some questions about its accounting procedures, the kind of questions that stretch out the SEC's review process for an initial public offering.
According to CNBC, "[T]he SEC remains focused on at least two of the company’s favored accounting metrics, say people familiar with the matter: gross profits and consolidated segment operating income, or CSOI. " Regulators who regulate? Shocker! Considering the glut of posts from a couple weeks back about Groupon, along with the tone of every single one of them, the only thing I'm surprised about is the SEC apparently actually taking it seriously.
Hacker News user pseudonym | What's your take? CNBC's anonymous sources say Groupon now hopes to go public in mid to late September. Short logic (Groupon IPO: Pass on this deal) Groupon’s IPO Filing Reveals Incredible Growth And $2.6 Billion Revenue Run-Rate (Charts) Groupon finally filed for its IPO today and now we can see it’s finances laid bare (click for full financial table). Groupon has been growing at an astounding rate. Last year, it’s revenues grew more than 22,000 percent to $713 million. And in the first quarter of 2011 alone, it nearly matched all of its revenue from last year with $644 million in sales, up 13,575 percent from a year ago. If you annualize Groupon’s first-quarter numbers, you get a revenue run rate of $2.6 billion for 2011, and that is not even factoring in any growth in subsequent quarters. Groupon had 83.1 million subscribers as of March 31, 2011, up from 3.4 million the year before.
But what about profits? Half of its workforce of about 8,000 people are in sales, a number CEO Andrew MAson threw out yesterday during an interview at the D9 conference. Groupon and its bankers will be pointing to its gross profits instead, which are much healthier. Groupon’s Business is Decaying in its Established Markets. By David Sinsky 6/03/11 10:28am Share this: The following is an in-depth analysis of Groupon’s business in one of its oldest markets, Boston, by the folks at daily deal aggregator Yipit.
The entire piece is worth reading, but for the TL;DR crowd, here is the breakdown. Groupon’s costs to acquire customers is skyrocketing, while its revenue per customer is plummeting. David Sinsky, Yipit Blog While no one has ever doubted Groupon’s impressive topline growth – the question has always been around the defensibility of a business that has so few barriers to entry. In its long awaited S-1, it’s clear that Groupon has impressive topline growth. Groupon’s Network Effect? Groupon argues it’s reached a virtuous cycle in its public filing: the larger one side of its market grows, the larger the other grows since scale in one provides for scale in the other.
However, when looking at the data for their Boston market, it does not appear that that Groupon has achieved this virtuous cycle. Money Morning Undo. Groupon Is a Straight-Up Ponzi Scheme | Groupon IPO| Knewton Blog. Would Your Business Use Groupon Again. Could Groupon be the next Enron?