Wednesday, January 18, 2012

Groupon is the fastest growing company ever in the history of American companies. However, it has yet to make a profit. Haven’t you noticed all the messages on your phone from local companies offering you sometimes as much as 90% off if you use the Groupon offer at that store? I’ve been going there for years and never got such a big discount!
Wall Street took notice of this company too. This past November Groupon had the biggest initial pubic stock offering IPO of any internet company since Google. The company’s worth jumped to an unexpected 18 Billion dollars on the first day of trading. It started only three years ago as a side project for a 31 year old mid-western guy. He re-invented the coupon by turning it into an internet tool for bargain hunting at your neighborhood stores.
Very quickly the company gained in popularity. He has already taken his company global taking in hundreds of millions of dollars PER MONTH. So, will this company really change the way people shop for things or is it simply another passing fad? The answer might be found in the thoughts of the companies’ Founder and CEO Andrew Mason.
So, when you subscribe to Groupon, you get a voucher that is worth cash that you can take into a business where the deals are at least 50% off. So, for example, a $40 meal at a steak house can cost you $20 with the coupon. Groupon already has 150 Million subscribers that receive a daily e-mail with the deal offers from local businesses. My friend Sharon should see if it brings in new customers to her book store.!
The company began in 2008 at the height of the recession when everyone was looking for a bargain and it grew so quickly and so fast, financial as well as the public were very surprised. Not only did Andrew bring the company into a retail revolution he did a boom for jobs. He hires up to 150 employees a week. His company is currently in 46 countries and employs about 10 thousand people.
Headquarters in Chicago looks like a call center with people huddling over their computers making deals with small businesses. They make deals with merchants and then tell them to give their product or service away at half the price. Now they are even tailoring their offers to customers by age and gender. So, some guy will not find in his e-mail an offer for a bikini wax or pole dancing lessons.
So, if the offers are half price and Groupon takes half off of that, where is the profit? Since he sends his subscribers an e-mail per day he even hired 400 writers and editors to develop hundreds of pitches a day. For example, to a dentist he writes, “Humans developed smiles as a way to deflect predators in the wild…”
Andrew is a wacky guy . He has a Porto potty as his executive bathroom, has a yoga video on You Tube in his tidy whities in front of a Christmas tree, never wears suits and poses with a cat on his head.
Andrew Sorkin , a financial columnist for the New York Times says, “ There are 500 other competitors out there, that all want to do and be Groupon. Amazon and Google are also getting into this business. So far, Groupon has spent an extraordinary amount of money to market their business so that they can beat back their competition.”
Groupon spends more money than they take in on employees paying for 10,000 employees. Facebook only employs about 3,000 people. At the moment Groupon has yet to turn a profit. When he decided to make the company a pubically traded company he had to disclose his finances.
His accounting tricks were revealed and his huge marketing costs were hidden. The double counted their revenues so on their books they made $60.6 Million dollars in 2010 when in reality they lost from operations $420.3 Million dollars. Analysts began calling Groupon inviolable, a ponzi scheme and wondered if anyone was minding the store.
Groupon ended up having a widely successful opening day trading on NASDAQ as a public company. On the first trading day Andrew Mason’s personal worth jumped to 1.3 Billion dollars.

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