Groupon Inc (GRPN) CEO Gone, Will it Matter?

Page 1 of 2

Groupon Inc (NASDAQ:GRPN) CEO and founder Andrew Mason is out of a job. In a message to Groupon employees, Mason spilled the news explaining he’d been fired and that if they didn’t know why they hadn’t been paying attention. This comes on the heels of a disastrous quarter and a stock price at nearly a quarter of its initial list price. During the earnings release a Groupon spokesman took questions that led to an awkward moment foreshadowing the firing. When asked whether the company’s poor performance would affect Mason’s job, the spokesman responded with a terse statement: “He’s here today.” The day after was a different story, but does it really change much for the company?

GrouponOne of the biggest issues with Groupon Inc (NASDAQ:GRPN) is its business model. While the company sparked plenty of interest early, even eliciting a $6 billion offer from Google Inc (NASDAQ:GOOG) , competition and inherent weaknesses in the model have taken their toll. Upon being spurned Google started its own daily deal site, Google Offers, and countless other firms have joined the daily deal space. Retail giant Amazon.com, Inc. (NASDAQ:AMZN) also threw its hat in the ring, investing in D.C.-based LivingSocial. Amazon owns slightly less than a third of the company, which is generally acknowledged as Groupon’s closest competitor.

Competition notwithstanding, it’s unclear whether the business model can consistently generate a profit. The company’s first IPO filing indicated $60.6 million in operating income for 2010 but relied on a non-GAAP metric many deemed misleading. Upon restatement the company reported an operating loss of $420 million for the year in question. The company has struggled to turn a profit, though it appears to be a common trend in the deals space. In January, an Amazon filing revealed LivingSocial had a net loss of $650 million for 2012, after losing $499 million the year before. Perhaps even more discouraging is the fact that LivingSocial’s loss came after doubling its revenue from the previous year. Amazon now values its portion of the company at $52 million as of year-end, down from $94 million three months prior. Even Google has struggled to make Offers work, gaining little traction despite being part of one of the web’s most visible brands. At this point Offers has taken a backseat to any number of Google initiatives, but even that highlights the weakness of the deals market.

The daily deal space demanded attention initially, but doesn’t seem to be able to support one, let alone the nearly 500 companies that operate in the space. Groupon Inc (NASDAQ:GRPN) has begun exploring e-commerce with its Groupon Goods, but even that may not save the company. In fact, moving from deals to online retail may be jumping out of the frying pan and into the fire. Even though Groupon Inc (NASDAQ:GRPN) currently faces numerous competitors, it is the dominant player in the deals space. A move to retail, even as a marketplace, puts it in contention with well-entrenched competition.

Pursuing retail puts it in direct contention with companies like Amazon and eBay Inc (NASDAQ:EBAY) , both of which have the assets and clout to smother Groupon. While eBay’s PayPal unit tends to dominate headlines, its marketplace and mobile businesses have been driving earnings and helping beat estimates. Mobile alone more than doubled to $13 billion in revenue, just behind the $14 billion generated by PayPal. The company also recently revamped its marketplace and has begun testing same day service in major cities, most recently rolling out a test in San José. Amazon has also started to explore same day delivery and continues to demonstrate its willingness to outspend the competition.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The 10 Countries with the Highest Suicide Rates

The 10 Most Technologically Advanced Countries in the World

The 10 Safest Countries in the World to Live in Peace

The 10 Top Selling Smartphones in the World 2014

The 12 Biggest Shopping Centers in the World

The 10 Friendliest Countries in the World

Qihoo 360 Technology Co Ltd (QIHU), Actavis plc (ACT), Yahoo! Inc. (YHOO) Among 20 Long Ideas from Sohn Canada

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!