Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Can Groupon Be Saved?

By

An analysis of what went wrong and, surprisingly, how it might turn around.

PrintPRINT
MINYANVILLE ORIGINAL Here's an anniversary story for you: Groupon (NASDAQ:GRPN) went public one year ago, with great fanfare and a last-minute price hike to $20 per share. It was the biggest Internet IPO since Google (NASDAQ:GOOG) in 2004. On Monday, Groupon closed at $2.66 a share. With luck, it might survive into the new year.

In an effort to increase its chances of survival, Groupon just announced a free shipping offer through the holidays on most of its Groupon Goods. It even rolled out its first-ever holiday catalog.

Groupon Goods is the newer division that sells deeply discounted products. Investors don't like it any more than they like Groupon's core business, selling coupons online for local businesses. It's lower margin, since they manage the inventory in-house. And it's got better-established competition with vastly larger inventory, like Overstock (NASDAQ:OSTK) and Half.com, owned by eBay (NASDAQ:EBAY).

What went wrong at the world's "fastest-growing company" (at least according to Forbes) ever? Nothing that wasn't obvious a year ago. Sure, it was growing fast, with a "marketing reach" of 150 million people. It also was losing money, its revenue growth was flat, and neither of those facts was adequately disguised by some truly squirrely accounting practices.

[In fact, some of its accounting is still a tad squirrely. The Wall Street Journal points out that Groupon has a respectable $1.2 billion in cash, but half of that is money owed to merchants but not yet paid out.]

Worst of all, the local merchants who were the drivers of its business were running like bunnies. They were telling horror stories about mobs of bargain-hunters who bought the loss leaders and never came back. These weren't big operators, they were mom-and-pop shops, like the British cupcake baker who wound up selling 102,000 cupcakes at a loss.

Still, Groupon was trying to make "local" work, and "local" is the Holy Grail of the Internet. Local information, local services, local news and coupons and advertising. Such an alluring idea, and nearly impossible to implement.
< Previous
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
PrintPRINT

Busy? Subscribe to our free newsletter!

Submit
 

WHAT'S POPULAR IN THE VILLE