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0 pointsVladRussian15y ago0 comments

>The difference is that Groupon is generating revenue near billions,

there is no problem to generate a billion revenue that costs a billion and half. Barings bank in 1995, Enron in 2002, Merrill Lynch in 2008 ...

>in 2000 companies were IPO'ing without any significant revenue or traction.

Of course, nobody would fall for this old trick of 2000 - IPO without revenue. So the new trick of 2011 is huge revenue, profit negative. You see, at the scale of a billion it is clear whether it is a profitable scalable business model or not.

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10 comments · 2 top-level

olivercameron15y ago· 7 in thread

Not at all. Groupon is cementing it's position as the market leader by spending a huge amount in expansion, thus it's going to result in losses for the foreseeable future. However, that doesn't mean they're not going to be profitable in years to come.

jamiequint15y ago

What does "market leader" mean in this market? The one who spends the most on direct marketing? I haven't talked to a single person who has brand loyalty to Groupon or uses it exclusively and there certainly isn't repeat business amongst a majority of their merchants. They're also in a business that, judging by the number of new entrants into the market, will see an attrition in profits-per-deal as time goes on.

Goladus15y ago

Market leader in this market means the brand that has the most users or most potential value to partners. That is, if a business is going to use a discount service to acquire new customers, the market leader will be able to bring in the most customers or the most high-value customers.

That doesn't answer the question about the ratio of investor cash-outs to expansion, though. It just (somewhat) addresses the question of whether a growth strategy without profits makes any sense at all.

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VladRussianOP15y ago

>Groupon is cementing it's position as the market leader by spending a huge amount in expansion, thus it's going to result in losses for the foreseeable future.

Iridium satellite phones.

portman15y ago

Or Amazon.com

Amazon lost $3 billion over 8 years before they started turning a profit. [1]

It's HARD to tell the difference between Iridium and Amazon. That's why some investors make money and some lose money.

[1] http://www.slideshare.net/faberNovel/amazoncom-the-hidden-em...

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yuvadam15y ago

So what exactly indicates that they are (going to be profitable in the years to come)?

guelo15y ago

From the other article they are apparently also spending huge amounts on cashing out the early investors.

Hisoka15y ago

Sooner or the later, the number of businesses that realize issuing 50% Groupons is a losing business will shrink to 0

freshfunk15y ago· 1 in thread

>there is no problem to generate a billion revenue that costs a billion and half. Barings bank in 1995, Enron in 2002, Merrill Lynch in 2008 ...

In all three of these cases, you have situations where sophisticated financial instruments were used to hide real losses or very risky and costly investment bets.

That's a very different situation than one where you're leveraging debt to gobble up market share to become the market leader for a certain kind of service. This is particularly useful in types of businesses where winner takes all.

MrMan15y ago

Kozmo.com might be another example from the past.

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