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Is Groupon Inc (GRPN) the Best Poorly Executed Idea Ever?

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GrouponWell, it’s official: Groupon Inc (NASDAQ:GRPN) CEO Andrew Mason finally got canned. Raise your hand if you did not see this one coming. It’s hard to discuss his accomplishments — which are very few, by the way — without acknowledging that three years ago, Mason turned down a $6 billion buyout offer from Google Inc (NASDAQ:GOOG) , which is more than twice Groupon’s current market cap. The company (then) felt it could do better. So, this gives you an idea of where this is going.

It’s a win-win-lose situation
Groupon’s story has been mixed since going public in November 2011, with a few ups and downs. However, over the past year, it’s hard to quantify how unimpressive, if not pathetic Mason’s leadership has been. During that span, he has been the poster child for how not every great idea can translate into a great business. And the odds of success are much worse with an inexperienced CEO, or according to Herb Greenberg, 2012’s worst CEO. The company had no chance.

Unfortunately, Groupon Inc (NASDAQ:GRPN) just realized how dim these odds were. But it just might be too late. Granted, Mason was no Steve Jobs, but there are still fundamental problems with this company that (once again) its recent earnings revealed. The concept of Groupon Inc (NASDAQ:GRPN) is sound. Mason figured out a way to truly give the “power to the people,” or groups, to create deals that benefit the companies and the customers, and in return Groupon took a cut of 40% to as much as 60% of the revenue. Indeed, customers and businesses got what they wanted. But Groupon created no competitive leverage.

No new markets, destined to fail
The beauty of this business, however, is that Groupon Inc (NASDAQ:GRPN) is able to profit while also connecting customers with businesses they otherwise might have never heard of. But here’s the problem, Groupon is working within an existing market — it’s not creating new ones. So how can it grow since theoretically, there’s a ceiling? This is what Mason failed to realize. Supporting existing markets can only take you so far. And besides, businesses that are already successful and well established have no need for Groupon.

What’s more, anyone can do it. How much would it cost to become the best “middle man?” And to invest in that business is, well, let’s just call it unwise, especially with Google and Facebook Inc (NASDAQ:FB) always one button away from putting you out of business. There’s no way Groupon can reach 1 billion users in the manner of Facebook, and Groupon doesn’t have a hope to achieve Google’s advertising dominance.

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