I Told You So: Groupon Edition #dailydeals

When I first Tweeted this in January, I received a lot of backlash as Groupon -along with the other daily deal sites- are tech’s darlings. Or shall I say were, as today Groupon announced their IPO filing. When the public read Groupon’s S-1 the Silicon Valley tech crowd seemed the most astonished by -GASP- Groupon actually losing money despite their profits.

At first glance, the YOY numbers are pretty impressive:

  • 1Q 2011 Revenue: $644.7 million
  • 2010 revenue: $713.4 million
  • 2009 revenue: $30.47 million

And I’m not going to pretend a net loss of $146.5M wasn’t a tad surprising. And even more shocking is how Groupon hasn’t turned a net profit in any of its first three years of operations, including a net loss of $389.6 million in 2010.

But still. One doesn’t have to be an economist to see right through their faulty model. If you know how the Internet works, a scientific calculator is far from necessary to know: their customer acquisition budget is sky freakin’ high. How else did Groupon gain so much traction in such a short time? Google fairies?

What’s more baffling, is, even with these near comedic metrics, Groupon is still valuated at an astronomical figure. The founders and investors are walking away super wealthy. And I still stand by what I Tweeted back in January: Groupon’s legacy will be an economic dissertation or a B-school case study.

Though the real winner? Google.
For 1. not spending $6B because Groupon turned down the acquisition offer and 2. all the $ Groupon will continue spending on AdWords.

Either which way, I’m just glad the daily deal craze will finally slow down. I’m so sick of hearing how amazing Groupon et al. are, because frankly? They are not. Daily deals are (were?) a hot trend.  I’m ready for some innovation.  A product with such mind-blowing technology it will stun me stupid.

It’s days like these, I wish I was an engineer.

P.S. If anyone has any inkling on how much Groupon spends a month on Adwords, do share. I tried Googling with no luck. Even Quora didn’t have an answer.

4 thoughts on “I Told You So: Groupon Edition #dailydeals

    1. What’s even more amusing, is the onslaught of back lash now that Groupon’s S-1 is public…. Such a bizarre industry, tech is.

      Thanks for the comment Brian!

  1. I love this. It most definitely goes back to what you and I were talking about in NYC. It’s a model that is unsustainable. Completely ignoring the ‘unlimited funding principle,’ Groupon can really on screw over each one of its business ‘partners’ once. After talking with a few local owners here in Austin, they have all said they will never do it again.

    Another one, using a LivingSocial deal, just folded because they lost so much money. It’s a deal that’s often great for the consumers and will leave businesses pocketless. And on top of all that, one day it will leave Groupon penniless.

    That being said, I have to commend them that they tried to make a model to actually make money. I feel that so many don’t anymore.

    tm

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