Groupon S-1 Reveals Business Model Deteriorating in Oldest Markets

by: yipit on June 3, 2011
81 Comments

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. However, when looking at its oldest markets, it appears that their business model is deteriorating.

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.

On the consumer side: “Increased relevancy enables us to offer several daily deals, which we believe results in increasing purchases by targeted subscribers, thereby driving greater demand for Groupons.”
On the merchant side: “Increasing our merchant base also increases the number and variety of deals that we offer to consumers, which we believe drives higher subscriber and user traffic, and in turn promotes greater merchant interest in offering deals through our marketplace, creating a network effect.”

However, when looking at the data for their Boston market, it does not appear that that Groupon has achieved this virtuous cycle.

The Boston Case Study

While Groupon is relatively opaque for most of its filing, it provides case studies of four of its major cities. We look at Boston since Chicago, the other US city, is Groupon’s home town.

Despite being one of Groupon’s oldest markets, Boston had demonstrated impressive growth: revenue, subscribers and customers have all tripled in the past year. This topline growth has been aided by the launch of personalized deals in Boston in Q3 2010: Groupon started running multiple deals per day in Boston through its targeting/personalization initiative.

Deeper analysis of the Boston case study, however, shows that despite impressive topline growth Groupon’s business model peaked around Q3 2010 and has been deteriorating ever since.

Consumers Buying Fewer Groupons

On the consumer side, we just need to answer one question:

Does Groupon’s ability to send targeted/personalized deals to subscribers (thanks to its large merchant base) drive increased demand for Groupons?

If this were true, it would imply that activity and revenue per subscriber metrics would increase right along with Groupon’s increased deals per day.

However, Groupon’s quarterly revenue per subscriber is declining Boston.

Groupon’s business model is predicated on the idea that the company can stomach the ever-increasing customer acquisition costs since an acquired customer should generate a steady flow of high margin revenue. However, this relies on existing customers purchasing several subsequent deals. While existing customers are indeed purchasing subsequent deals, they are doing so at a declining rate, despite Groupon’s recent targeting efforts.

Far more worrisome for Groupon is the fact that its existing customers (those 20% of subscribers who have ever bought a Groupon) are also becoming less engaged. The Boston Case Study reveals purchases made from existing customers by removing the impact of purchases made by new customers each period:

Frequently when you see this deterioration in a company’s existing customer base it is because the average customer is getting “older” and these “older” customers tend to be less active.

However, due to the exponential growth in customers, the average “age” of Groupon’s customer base has been roughly the same since Q1 2010. In other words, the average customer isn’t getting older.

As Groupon begins to reach saturation in Boston and its customer base inevitably ages as a result, reversing the decline in participation from its existing customer base will only become more difficult.

Groupon’s Customer Acquisition Costs are Rising

And of course, right when Groupon’s customers are becoming less engaged, and therefore less profitable – Groupon’s costs to acquire customers are skyrocketing.

Given the recent entrance of well-financed competitors such as Google, Facebook and Microsoft its hard to believe Groupon’s customer acquisition costs will slow anytime soon. Along with declining engagement from existing customers, this does not bode well for the future of Groupon’s margins.

Groupon Selling Fewer Deals per Merchant

The second question is whether Groupon’s industry-leading subscriber base will attract merchants willing to pay a premium to run with Groupon and preventing other players from effectively driving down gross margins to compete on cost.

According to Groupon, merchants are willing to pay a premium for their reach.

However, Groupon’s targeting/personalization strategy is leading to a decline in the number of Groupon’s purchased per deal as the number of deals Groupon is running per city far outpaces the growth in subscribers.

So what is happening in Boston? Groupon’s subscriber base has increased an astonishing 300% in the last year, but the number of deals Groupon ran in the area actually grew faster. This, along with the declining engagement of its customer base has led to the inevitable conclusion that the number of Groupons each deal sells is declining quickly.

Should personalization increase conversion rate per deal, this may offset decline in reach – Groupon could presumably increase total merchant satisfaction by satisfying more merchants more efficiently. However, as the average purchases per customer continues to decline so will overall conversion rates on personalized deals.

Groupon’s decision to rapidly increase the number of deals per metro has allowed competitors to credibly tell merchants that they deliver more customers than Groupon can in major cities such as Boston. Based on the Yipit Data Product, which features nearly 20,000 offers per month across major US metros, both Travelzoo and LivingSocial now average more vouchers sold per deal than Groupon in most major North American cities.

Several other players such as OpenTable, WagJag, DealFind regularly sell as many or more vouchers per deal as Groupon in major markets as well. This calls into question any network effect that Groupon thinks it may have by having the largest subscriber base in the industry. Merchants won’t pay a premium for total subscribers if Groupon can’t deliver more new customers than the competition.

If Groupon can’t charge a premium for its larger subscriber base, what competitive advantage or network effect does it have on the merchant side of the market?

Groupon Operating Margins Declining

While Groupon is experiencing rapid revenue growth, we believe operating margins are declining because, as we’ve shown above:

Revenue per Groupon customer is declining
Cost to acquire those customers are increasing
Sales costs are increasing as it needs to run smaller deals with more merchants to personalize the experience

While Groupon doesn’t reveal costs in Boston, by taking company-wide customer acquisition costs and SG&A costs (allowing for some opearating leverage) you see significantly declining operating margins.

Why Is This Happening? Competition Has Arrived

A year ago, according to Yipit data, there were 9 daily deal services in Boston offering 15 active deals.

Today, Yipit Boston, shows 23 separate services offering daily deals including new successful entrants like TravelZoo and Yelp. The 23 services are responsible for creating 91 active daily deals.

Worse for Groupon, there’s no sign of this ending with Google and Facebook on the horizon. Plus, successful entrants like TravelZoo are still only running two deals a week.

“Groupon Now” May Be the Answer

The silver-lining in all of this is Groupon Now, a new mobile product from Groupon that provides real-time deals to users. With its massive salesforce and many merchant relationships, Groupon is possibly the only company capable of having enough deal inventory to make a product like Groupon Now possible. If they are able to make the business model work, then Groupon will have the eventual network effect.

What Does This Mean For the IPO?

As one of Groupon’s oldest markets, Boston offers a glimpse into the future as the rest of Groupon’s business matures. Declining revenue per user, increasing customer acquisition cost, and declining operating margins do not bode well for the company’s core business. Given all of this, Groupon’s IPO valuation may come down to how investors perceive the prospects of Groupon Now. Since Groupon only recently launched Groupon Now in a few test markets and has not yet provided data on those launches, it remains unclear how investors will value Groupon Now.

Follow @YipitData on Twitter for the latest industry trends and analysis by the Yipit Team.

David Sinsky, Jim Moran and Vinicius Vacanti contributed to this post. David runs Yipit’s Data Product, which provides past offer detail and competitive intelligence to the Daily Deal Industry.

http://twitter.com/schlaf Steve Schlafman

Great post guys. Easily the best case study I’ve read on the topic. As you know Boston is a hotly contested daily deal market with BuyWithMe, Living Social, SCVNGR all going after customers. Additionally, regional websites like the sports powerhouse WEEI as well as Boston.com are now offering their own daily deals. Given this, I would venture to say it’s easily one of the most competitive markets in the country. That said, one reason their churn numbers are dropping in that market is because there’s so much competition and differentiation is going to come in the quality of deals which probably isn’t significant enough to keep the metrics going up. Just my two cents.
http://www.facebook.com/daniil.sokolov Daniil Sokolov

Interesting info before IPO.
Anonymous

To make money long term, a company needs to provide something that is (a) useful and (b) scarce. Daily deals are very useful to consumer, arguably useful to merchants, and not scarce at all. When your main competitive advantage seems to be “look at how hilarious our copywriters are!” your margins are eventually going to shrink.

Great party while it lasted though.

Btw nice article Dave. Great to see the numbers as they develop.

http://over40innovator.blogspot.com Roger Toennis

So now you know, Atillahn, you are going to get in trouble for asking why these deep-discounting “emperors” are walking round with no clothes on. You are supposed to pretend that Groupon, Living Social and all the other discounting rats can feast off of small businesses like vampires for ever and everything will be “just fine”. Such a killjoy!!
http://over40innovator.blogspot.com Roger Toennis

So now you know, Atillahn, you are going to get in trouble for asking why these deep-discounting “emperors” are walking round with no clothes on. You are supposed to pretend that Groupon, Living Social and all the other discounting rats can feast off of small businesses like vampires for ever and everything will be “just fine”. Such a killjoy!!

http://twitter.com/alexkehayias Alex Kehayias

Great analysis guys. Really interesting read.
http://twitter.com/alexkehayias Alex Kehayias

Great analysis guys. Really interesting read.
http://twitter.com/alexkehayias Alex Kehayias

Great analysis guys. Really interesting read.
http://www.brekiri.com/ Greg4

Great analysis, but I think you cut a couple of corners. One, can we get vertical axes that go to zero? Some of these graphs are a bit misleading. Two, of course marginal customers are going to be less profitable and harder to acquire. Not every customer is going to be your best customer, and early adopters are usually more engaged. Unless you break these numbers down by cohort and show that early customer cohorts are themselves deteriorating, this isn’t necessarily a big problem for GroupOn. They’re just doing what every good startup does, spending on customer acquisition as long as CAC < CLTV. I think that's still the case, although I haven't done the math. Ideally, I would love this article to do the math for me.

Having said that, I totally agree with the overall premise that the business in its current form isn't sustainable and has no overwhelming barriers to entry. No wonder GroupOn is cashing out so aggressively. Sell high!

FJCruiser79

Really well said, and exactly what I’ve been thinking as I’ve read blogs that are crushing GRPN’s numbers. It really comes down to knowing the LTV of your customer, and spending appropriately to acquire that customer. Of course, after the early adopters – and likely big spenders – are acquired, less profitable late-arrivers will follow.

I’m less concerned about the above – and more focused on the general sustainability of GRPN’s position (no barriers to entry, low switching costs). And of course, at some point merchants are going to push back AGGRESSIVELY. 50%-cuts won’t fly.
FJCruiser79

Really well said, and exactly what I’ve been thinking as I’ve read blogs that are crushing GRPN’s numbers. It really comes down to knowing the LTV of your customer, and spending appropriately to acquire that customer. Of course, after the early adopters – and likely big spenders – are acquired, less profitable late-arrivers will follow.

I’m less concerned about the above – and more focused on the general sustainability of GRPN’s position (no barriers to entry, low switching costs). And of course, at some point merchants are going to push back AGGRESSIVELY. 50%-cuts won’t fly.
FJCruiser79

Really well said, and exactly what I’ve been thinking as I’ve read blogs that are crushing GRPN’s numbers. It really comes down to knowing the LTV of your customer, and spending appropriately to acquire that customer. Of course, after the early adopters – and likely big spenders – are acquired, less profitable late-arrivers will follow.

I’m less concerned about the above – and more focused on the general sustainability of GRPN’s position (no barriers to entry, low switching costs). And of course, at some point merchants are going to push back AGGRESSIVELY. 50%-cuts won’t fly.

http://www.facebook.com/profile.php?id=1104051 Michael Zhang

This is amazing stuff. Thanks guys.
http://www.facebook.com/profile.php?id=1104051 Michael Zhang

This is amazing stuff. Thanks guys.
http://www.facebook.com/profile.php?id=1104051 Michael Zhang

This is amazing stuff. Thanks guys.
http://blog.browserous.com/ Tal Baron

Great analysis. I live in Boston and remember when getting a Groupon in my inbox was exciting. Now the bevy of emails from Groupon and other daily deal sites sits in my bulk folder in Gmail and I go through once a week deleting almost all of them (and rarely making a purchase). Daily deals have become over saturated and I now consider those emails spam.

I am very interested to see the numbers on Groupon Now and would be interested in trying it. I’ve heard of a few other startups working on localized timely deals but can’t remember the name…but they are working with merchants to offer deals during slow business hours (say 3;30pm at a pizza place) to those nearby. Should be interesting as this new marketplace develops.

http://blog.browserous.com/ Tal Baron

it must be my lucky day… Groupon Now is available in Boston today - http://bostinnovation.com/2011/06/03/groupon-now-launches-real-time-deals-in-boston-to-give-control-back-to-merchants/

http://over40innovator.blogspot.com Roger Toennis

“Groupon Now” – The perfect service for business owners who think Groupon is too slow at helping them run themselves out of business with over-discounting.

http://blog.browserous.com/ Tal Baron

it must be my lucky day… Groupon Now is available in Boston today - http://bostinnovation.com/2011/06/03/groupon-now-launches-real-time-deals-in-boston-to-give-control-back-to-merchants/
http://blog.browserous.com/ Tal Baron

it must be my lucky day… Groupon Now is available in Boston today - http://bostinnovation.com/2011/06/03/groupon-now-launches-real-time-deals-in-boston-to-give-control-back-to-merchants/

http://blog.browserous.com/ Tal Baron

Great analysis. I live in Boston and remember when getting a Groupon in my inbox was exciting. Now the bevy of emails from Groupon and other daily deal sites sits in my bulk folder in Gmail and I go through once a week deleting almost all of them (and rarely making a purchase). Daily deals have become over saturated and I now consider those emails spam.

I am very interested to see the numbers on Groupon Now and would be interested in trying it. I’ve heard of a few other startups working on localized timely deals but can’t remember the name…but they are working with merchants to offer deals during slow business hours (say 3;30pm at a pizza place) to those nearby. Should be interesting as this new marketplace develops.
http://blog.browserous.com/ Tal Baron

Great analysis. I live in Boston and remember when getting a Groupon in my inbox was exciting. Now the bevy of emails from Groupon and other daily deal sites sits in my bulk folder in Gmail and I go through once a week deleting almost all of them (and rarely making a purchase). Daily deals have become over saturated and I now consider those emails spam.

I am very interested to see the numbers on Groupon Now and would be interested in trying it. I’ve heard of a few other startups working on localized timely deals but can’t remember the name…but they are working with merchants to offer deals during slow business hours (say 3;30pm at a pizza place) to those nearby. Should be interesting as this new marketplace develops.
Frankxr

Good analyses – but offering more daily deals does not increase relevancy nor does offering a deal “now” the simple truth is that I have received hundreds of “deals” from groupon and only 1 or two have been relevant. I spent more time considering and filtering all the spam they send me than the value I get from the one or two coupons that actually were of any value to me.
Frankxr

Good analyses – but offering more daily deals does not increase relevancy nor does offering a deal “now” the simple truth is that I have received hundreds of “deals” from groupon and only 1 or two have been relevant. I spent more time considering and filtering all the spam they send me than the value I get from the one or two coupons that actually were of any value to me.
Frankxr

Good analyses – but offering more daily deals does not increase relevancy nor does offering a deal “now” the simple truth is that I have received hundreds of “deals” from groupon and only 1 or two have been relevant. I spent more time considering and filtering all the spam they send me than the value I get from the one or two coupons that actually were of any value to me.
http://twitter.com/Gert_S Gert Steens

Nice one. Thanks for the hard work! Offers good view of “maturity” and thus a much better quantitative basis for valuation than earliest stage.
So new customers are tougher to win and spend less than the early adopters. Would anyone have assumed that operating margins in maturity would be double-digit? Mid-single digit appears more congruent with high volume customer services in general.I am not so sure that the charts suggest that the business model is deteriorating, more that there is a normal pattern towards maturity.
In fact, I would interpret the charts as confirming the quality of the business model: I am impressed to see that the incremental deals per day sell similar number of groupons per deal. Suggests that they manage to find smaller deals that the “late-comers” are actually interested in just as much as the early adopters were interested in the early deals.
As for the merchants: they presumably judge the Groupon cut as customer acquisition costs in the very same CAC < CLTV metric. Competition for Groupon may lower the CAC for merchants, but that implies they will settle for lower CLTV, i.e. lower quality customers, i.e. a wider circle of subscribers. In terms of penetration, I would not be surprised if local duopolies or even triopolies tend to fare better than effective monopolies, aggressively crowding out former generations of a coupon model. We've seen that in other businesses (mobile telephony and free newspapers spring to mind).

http://over40innovator.blogspot.com Roger Toennis

The fatal flaw in the logic of the “group online discounting” (GOD) business model is in the false assumption that a customer who uses a GOD coupon at a given merchant has been “acquired”.

This is a “now-false” premise that the discount services are using to lure the merchant into this self-destructive discounting.

In the past, occasional deep discounting by a business was effective in generating enough true “customer acquisitions”, producing enough subsequent purchases by those consumers, that in the long run the business profits from having offered the deep discount in the first place.

That traditional ROI model does not work in the context of these recent discounting services.

Why? Because the repeat business from the consumer now goes to the discount service itself, not to the merchants that use the service.

It’s not in Groupon’s interest for me to do 4 or 5 or 10 Groupon purchases and then start going back to those 4 or 5 or 10 businesses repeatedly while ignoring all the new discounts coming to me daily from other, new businesses offering deep discounts.

So the GOD business model is in fact a “false GOD” that merchants should be extremely wary of when they get asked to make sacrifices at this discounting “altar”.

Combined with the lack of barrier to entry Groupon an it’s ilk will rapidly “disintermediate themselves” when Facebook and Google and Amazon offer the discounting service for FREE and still remain viable because they have other business models (Search Display Ads, Social Display Ads, Online Buying of Products, etc)

How can people not see this flaw?
http://over40innovator.blogspot.com Roger Toennis

The fatal flaw in the logic of the “group online discounting” (GOD) business model is in the false assumption that a customer who uses a GOD coupon at a given merchant has been “acquired”.

This is a “now-false” premise that the discount services are using to lure the merchant into this self-destructive discounting.

In the past, occasional deep discounting by a business was effective in generating enough true “customer acquisitions”, producing enough subsequent purchases by those consumers, that in the long run the business profits from having offered the deep discount in the first place.

That traditional ROI model does not work in the context of these recent discounting services.

Why? Because the repeat business from the consumer now goes to the discount service itself, not to the merchants that use the service.

It’s not in Groupon’s interest for me to do 4 or 5 or 10 Groupon purchases and then start going back to those 4 or 5 or 10 businesses repeatedly while ignoring all the new discounts coming to me daily from other, new businesses offering deep discounts.

So the GOD business model is in fact a “false GOD” that merchants should be extremely wary of when they get asked to make sacrifices at this discounting “altar”.

Combined with the lack of barrier to entry Groupon an it’s ilk will rapidly “disintermediate themselves” when Facebook and Google and Amazon offer the discounting service for FREE and still remain viable because they have other business models (Search Display Ads, Social Display Ads, Online Buying of Products, etc)

How can people not see this flaw?

http://twitter.com/Gert_S Gert Steens

Nice one. Thanks for the hard work! Offers good view of “maturity” and thus a much better quantitative basis for valuation than earliest stage.
So new customers are tougher to win and spend less than the early adopters. Would anyone have assumed that operating margins in maturity would be double-digit? Mid-single digit appears more congruent with high volume customer services in general.I am not so sure that the charts suggest that the business model is deteriorating, more that there is a normal pattern towards maturity.
In fact, I would interpret the charts as confirming the quality of the business model: I am impressed to see that the incremental deals per day sell similar number of groupons per deal. Suggests that they manage to find smaller deals that the “late-comers” are actually interested in just as much as the early adopters were interested in the early deals.
As for the merchants: they presumably judge the Groupon cut as customer acquisition costs in the very same CAC < CLTV metric. Competition for Groupon may lower the CAC for merchants, but that implies they will settle for lower CLTV, i.e. lower quality customers, i.e. a wider circle of subscribers. In terms of penetration, I would not be surprised if local duopolies or even triopolies tend to fare better than effective monopolies, aggressively crowding out former generations of a coupon model. We've seen that in other businesses (mobile telephony and free newspapers spring to mind).
http://twitter.com/Gert_S Gert Steens

Nice one. Thanks for the hard work! Offers good view of “maturity” and thus a much better quantitative basis for valuation than earliest stage.
So new customers are tougher to win and spend less than the early adopters. Would anyone have assumed that operating margins in maturity would be double-digit? Mid-single digit appears more congruent with high volume customer services in general.I am not so sure that the charts suggest that the business model is deteriorating, more that there is a normal pattern towards maturity.
In fact, I would interpret the charts as confirming the quality of the business model: I am impressed to see that the incremental deals per day sell similar number of groupons per deal. Suggests that they manage to find smaller deals that the “late-comers” are actually interested in just as much as the early adopters were interested in the early deals.
As for the merchants: they presumably judge the Groupon cut as customer acquisition costs in the very same CAC < CLTV metric. Competition for Groupon may lower the CAC for merchants, but that implies they will settle for lower CLTV, i.e. lower quality customers, i.e. a wider circle of subscribers. In terms of penetration, I would not be surprised if local duopolies or even triopolies tend to fare better than effective monopolies, aggressively crowding out former generations of a coupon model. We've seen that in other businesses (mobile telephony and free newspapers spring to mind).
Anonymous

Very interesting an informative analysis. I tend to agree that Groupon now is really the silver lining – and that there existing relationships will help them make that work.
Anonymous

Very interesting an informative analysis. I tend to agree that Groupon now is really the silver lining – and that there existing relationships will help them make that work.
Anonymous

Very interesting an informative analysis. I tend to agree that Groupon now is really the silver lining – and that there existing relationships will help them make that work.
http://profitably.com Graham Siener

Shh! How am I supposed to short Groupon now?
http://profitably.com Graham Siener

Shh! How am I supposed to short Groupon now?
http://twitter.com/altima_au Alexander Levashov

Interesting analysis. For Groupon another problem is that their cash will finish next quarter if the continue to burn it same rate and don’t get any extra financing
http://twitter.com/altima_au Alexander Levashov

Interesting analysis. For Groupon another problem is that their cash will finish next quarter if the continue to burn it same rate and don’t get any extra financing
http://twitter.com/altima_au Alexander Levashov

Interesting analysis. For Groupon another problem is that their cash will finish next quarter if the continue to burn it same rate and don’t get any extra financing
http://www.thedatarevolution.com Dan Murray

Since these look like Tableau charts can you post to public so that we can make our own analysis?

http://twitter.com/jdmoran Jim Moran

All the charts are driven from data in the S-1
http://twitter.com/jdmoran Jim Moran

All the charts are driven from data in the S-1

http://www.thedatarevolution.com Dan Murray

Since these look like Tableau charts can you post to public so that we can make our own analysis?
http://www.thedatarevolution.com Dan Murray

Since these look like Tableau charts can you post to public so that we can make our own analysis?
Greghvaness

Very interesting. Does anyone here have any comments that they would offer on AdzZoo and Qnanza’s version of coupon sales – limited number of coupons offered over a longer time period (monthly)?
Greghvaness

Very interesting. Does anyone here have any comments that they would offer on AdzZoo and Qnanza’s version of coupon sales – limited number of coupons offered over a longer time period (monthly)?
Greghvaness

Very interesting. Does anyone here have any comments that they would offer on AdzZoo and Qnanza’s version of coupon sales – limited number of coupons offered over a longer time period (monthly)?
Atillahn

Two more interesting questions for “DOTCOM 2.0″.

1. Is the IPO for Pandora as dead as Groupon with Apple iCloud announced? It would seem that Pandora can’t grow if the music labels go to a subscription model with Apple in addition to iTunes. Personal radio stations from iCloud with music you pick would seem to be a no brainer.

2. What does the facebook IPO look like now? What do facebook ad buys look like in revenue and cost of customer?
Atillahn

Two more interesting questions for “DOTCOM 2.0″.

1. Is the IPO for Pandora as dead as Groupon with Apple iCloud announced? It would seem that Pandora can’t grow if the music labels go to a subscription model with Apple in addition to iTunes. Personal radio stations from iCloud with music you pick would seem to be a no brainer.

2. What does the facebook IPO look like now? What do facebook ad buys look like in revenue and cost of customer?
Atillahn

Two more interesting questions for “DOTCOM 2.0″.

1. Is the IPO for Pandora as dead as Groupon with Apple iCloud announced? It would seem that Pandora can’t grow if the music labels go to a subscription model with Apple in addition to iTunes. Personal radio stations from iCloud with music you pick would seem to be a no brainer.

2. What does the facebook IPO look like now? What do facebook ad buys look like in revenue and cost of customer?
http://www.facebook.com/people/Joel-Silver/620520095 Joel Silver

This is helpful analysis. I don’t understand how you got the acquisition cost to rise to $30. This seems high given all other quarters before this and other industry information of this hovering around $5.

Any illumination would be helpful.

Anonymous

Agreed. Please tell me that this the $30.00 reported acquisition cost from above is a true average, and not from their recent $30 referral bonus promotion: http://www.centernetworks.com/groupon-offers-large-referral-bonuses
Anonymous

Agreed. Please tell me that this the $30.00 reported acquisition cost from above is a true average, and not from their recent $30 referral bonus promotion: http://www.centernetworks.com/groupon-offers-large-referral-bonuses
Anonymous

Agreed. Please tell me that this the $30.00 reported acquisition cost from above is a true average, and not from their recent $30 referral bonus promotion: http://www.centernetworks.com/groupon-offers-large-referral-bonuses

http://www.facebook.com/people/Joel-Silver/620520095 Joel Silver

This is helpful analysis. I don’t understand how you got the acquisition cost to rise to $30. This seems high given all other quarters before this and other industry information of this hovering around $5.

Any illumination would be helpful.
http://www.facebook.com/people/Joel-Silver/620520095 Joel Silver

This is helpful analysis. I don’t understand how you got the acquisition cost to rise to $30. This seems high given all other quarters before this and other industry information of this hovering around $5.

Any illumination would be helpful.
http://over40innovator.blogspot.com Roger Toennis

What few seem to notice, or they see it but also somehow at the same time decide to ignore, is that the business model for all the deep discounting services has a very simple and fatal flaw that will prevent it from lasting in the marketplace for the long run. So a Groupon IPO, or any IPO for a discounting service, is a fools errand.

That fatal flaw is something that has been known about business since the beginnings of commerce and it has nothing to do with competition from clones

Simply put, “The more a business uses deep discounting to attract customer traffic the faster they lose the ability to remain profitable and remain IN business. ”

In other words.. Groupon/Living Social, et al profit off of businesses who are in, or who use Groupon, et al. to initiate, a “discounting death spiral”.

This nutty business model actually makes it MORE difficult over time for the small businesses using it to CONTINUE to use the Groupon service.

So once the “premium” has been taken off the “death spiral marketing” market, Groupon and it’s clones are going to get sucked into the very same black hole of discounting into which they are shoving/dragging all these small businesses doing Groupons.

Groupon and all discounting services are toxic to the viability of it’s paying customers and therefore eventually toxic to to themselves.

It amazes me how often humans fall into the trap of thinking there are free lunch solutions in this universe no matter how many times the universe slaps them in the face with the reality of “You get what you pay for.”

Business 101: “You buy something, you sell it for more.” – Father Guido Sarducci’s 1-Minute University
Pingback: How effectively does Groupon leverage its size? | Bryan Wempen
Pingback: Don Dodge on The Next Big Thing: How does Groupon work? Is the … | work
Pingback: Why I won’t be Buying $GRPN Stock | Perry Blacher
Pingback: Investing in Groupon is a bad deal, say experts | News and Trend
Pingback: Groupon: Can you really count on the ROI?
Pingback: OPISO » Does Groupon Have Reason To Worry?
Pingback: For Groupon, Does Size Matter? « Finance Blog
Pingback: Groupon S-1 Conclusion: Germans love Groupon almost as much as David Hasselhoff — EatMetrics
Pingback: Does Groupon Have Reason To Worry? | BNewsworld
Pingback: So — Do We Buy Shares in Groupon? 8 Big Qs | Local Onliner
Pingback: » Memo to SEC: Groupon Has No Competitive Advantage, Stop Its IPO » Offers limitless
Pingback: So — Do We Buy Shares in Groupon? 8 Big Qs » Local Search Engine Optimization
Pingback: Is Travelzoo Better Than Groupon? – travel deals
http://twitter.com/travisaacson Travis Isaacson

So much of what is going on in this industry sounds familiar–almost like we’ve seen this movie before. Let’s see… a business model with obvious and fatal flaws + lots of investors clamoring to it anyway + insane growth + crazy valuations…

I don’t know. Maybe I’m missing something.

What do you think? Are we looking at a Daily Deal Bubble?
EinFairy

This is my job. I am so sorry.
iphone case
iphone 4 case
ysl shoes
jimmy choo shoe
christian louboutin shoe
christian louboutin pumps
jimmy choo boots
Air Max 90
Nike Shox
Nike Air Max 90
Nike rift
Nike Air Max 90
Air Max 90
lingerie
sexy sexy lingerie
sexy underwear
lingerie sexy
iphone 4 case
iphone 4 cover
iphone 4 cases
ED Hardy
ED Hardy Clothing

whitenight

Aw look at that, a remorseful spammer LOL. Unfortunately for your “job”, you posted on a blog that nofollows the comments, so your efforts are worthless. Good “job”!

peter

The revenue per customer is about $ 14. But how is that calculated? I can’t reproduce that.
Pingback: As Groupon Prepares to Go Public, Its Business Model Is Faltering - NYTimes.com
Pingback: Is Groupon’s Business Model Sustainable? – Business
http://www.cinefind.com/ Hindi movies online

nice facts!

Hindi movies online
SFMoored

As a previous consumer of Groupon deals in San Francisco, two things:
1- The deals have not been compelling in a long time (were they ever, really?), 2- Groupons purchased have gone unused – I realize I’d rather pay full price for 1 deal than pay for 2 wasted deals, 3- So much competition in that I’ve begun unsubscribing from the deals and find most of them ‘yawn’.
Anonymous

This is an interesting post, but what I’m most curious about is why Yipit would post it. Since you’re essentially in the daily deal business, eviscerating Groupon (and by extension, all other daily deal sites) seems like it would not be in your interest. Do you expect this to help you sell your data product? Please set forth any potential conflicts of interest applicable to Yipit so we can truly evaluate your objectivity and how it impacts your analysis.
Cheap Gucci Shoes

Our top rated online shoe store
has a huge range of Cheap Coach
Shoes, including dress shoes, athletic shoes, Cheap DG Shoes,
casual shoes and slippers. Gucci women’s shoes at Styledrops.com gives women
their shoe fashion dreams come true at affordable prices. Cheap Prada
Shoes Need a hard-to-find Gucci women’s shoe? Try
searching in our online store and enjoy a wide selection of quality GCheap Gucci
Shoes, ready for you.
Anonymous

Ugg classic boots alway the iconic silhouettes of ugg boots australia.They are make of authentic twinface sheepskin and cushy foam for added comfort and ease covered with a genuine sheepskin sock that by natural means wicks ugg boots ugg boots uk sale sale away dampness and assists preserve your feet dry.Use Classic Suede UGG Boots warm and comfortable in winter season, these boots are the must-have footwear manufacturer.
Guest

I think it’s all really simple – 6 months ago, I bought several Groupons to use at decent local restaurants and to purchase – at a discount – services that were useful. My step-son knew I used Groupon, so he bought me a Groupon gift card for Christmas. Now, I’m simply waiting for one half-way decent deal so I can use the gift card before Groupon shutters its doors. All analysis aside, sometimes you have to boil this down to the simplest common denominator: is the consumer interested in what the company is selling. Groupon, whether as a result of competition or just a natural evolution of its business, picked off the good, low-hanging fruit awhile ago. Now, all it can offer is crap to the consumer. That is an unsustainable business model in any universe.