Groupon is accused of high revenue and high losses

Absrtact: Pop diner, the restaurant in Queens, New York, is actually not pop at all. The restaurant was only a 15-minute drive from the house when the journalist bought a coupon from Groupon. But the reporter has lived in the local 3 years, but never heard

Pop diner, a restaurant in Queens, New York, is not pop at all.

The restaurant was only a 15-minute drive from the house when the journalist bought a coupon from Groupon. But the reporter has lived in the local 3 years, but has never heard of this pop diner.

This is a 24-dollar voucher, and the reporter only pulled out two dollars. Because the reporter has received a 10-dollar voucher after registering on Groupon's website, the above coupon is priced at $12.

After completing the group purchase, the reporter received a welcome letter from groupon--, the world's largest group buying site, as one of its more than 80 million users.

In the process of recruiting journalists into full membership, Groupon spends 10 of dollars. However, this does not guarantee that new members like reporters will continue to buy Groupon.

This is the global group buying "originator" before the listing of the crisis of confidence in miniature.

In a prospectus submitted by Groupon to the Securities and Exchange Commission (SEC) recently, a letter from Groupon's founder and CEO Mason to future investors was attached. Sensational, but also expressed the "future is bright, the road is tortuous" meaning.

Like many of China's "quick-footed" companies, Groupon has faced skepticism and criticism at this point in the current infinity of listings.

Indeed, the concerns of Groupon are also found in the prospectus.

For example, Groupon gave a 42% profit margin in the first quarter of this year, with a loss of $146 million.

How much of this business model is thought to have "lost money" to continue?

10 Dollar voucher Mystery

Groupon is on a new wave of U.S.-listed companies.

LinkedIn, the US social networking site, has just been launched, offering 7.84 million common shares to raise 217 million dollars. It has also become the most exciting internet share listing for US companies since the 2004 Google IPO financing of $1.67 billion.

In addition, there is the latest news that Facebook may be in the 2012-year IPO, after the listing of the company's market value is likely to exceed 100 billion U.S. dollars.

Groupon Lonely has even begun to get a high profile. Its chairman, co-founder Eric Levkovsky has founded several companies, two of which are also listed companies. Now, however, the seasoned veteran of the listing seems ignorant of the SEC's rules, calling High-profile media interviews in the "silent period" after the IPO and saying it will "make a big profit".

Is this a strong momentum or a "Bans" chanting?

The company's gross profit margin for the first quarter of this year was 41.9%, according to Groupon's prospectus.

For a simple analogy, this means Groupon earns $5.03 for every coupon sold at $12. But if Groupon spends 10 dollars (the 10-dollar voucher) to lure new customers, it ends up losing 4.97 dollars.

In fact, according to Groupon's financial statements, the company's marketing costs for the first quarter of this year amounted to $208.2 million trillion, accounting for 32.3% of the total revenue of 644.7 million U.S. dollars, and then removed nearly 60% of the cost of purchasing coupons, resulting in a loss of more than 100 million dollars.

At present, the company's huge marketing costs have become the biggest worry investors.

"The cost of attracting new customers is very high. Mack Honghai, managing director of Weng Hai Management, told reporters, "Facebook and Google are trying to compete with Groupon, they have a lot of users, and the cost of winning users is lower than Groupon, so I think Groupon is struggling to compete with them." ”

Jeffrey Basse, a capital partner at a VC company in Boston, also said in an analysis that Groupon coupons sold every thousand people from 12.14 in the first quarter of 2010 to 2.27 in the first quarter of 2011. It can be seen that many of Groupon's users are not active users.

However, Groupon thinks marketing costs are worth the money, and its prospectus says it spent 18 million of dollars on online marketing to lure North American subscribers in the second quarter of last year, with 61.7 million of billions of dollars of gross profit as of the first quarter.

But many in the industry are skeptical about the stickiness of these subscribers.

Groupon also mentions a range of risks in the prospectus, including "We've had a net loss since its inception and we expect our operating expenses to continue to grow significantly over the foreseeable future".

Pretty "transcript" behind

According to Groupon, the company's revenue in the first quarter of 2011 grew 14 times times to $644.7 million trillion, but its operating losses since its inception in 2008 have accumulated more than $500 million trillion.

It is noteworthy that the revenue mentioned here refers to the company does not consider any cost of pure sales revenue.

That is, if Groupon sells a 100-dollar restaurant coupon, it has a revenue of 100 dollars, but it does not take into account the cost of Groupon being refunded to the restaurant based on the size of the discount.

This is a very common method of computing in the American investment community. This is true of the travel discount sites in the United States, Expedia and Priceline. Reporters from a number of new companies in the United States, the CEO of the company learned that they are also the way the calculation. Because investors, especially private equity, measure the company's investment potential, mainly looking at revenue indicators. This also caused some CEOs regardless of cost, deliberately pull high revenue, thus able to hand over the beautiful "transcripts."

According to Groupon's recent application, a maximum of $750 million is expected to be raised, and the company's valuation is thought to be 20 billion dollars.

"It's hard to value Groupon because it's still losing money," he said. Given the number of competitors entering the field, this is a big gamble for long-term investors. "Honghai said.

Some analysts have even linked Groupon to the Ponzi scheme.

Jos Ferrare, founder and CEO of Knewton, an online education firm, wrote that Groupon, unlike new social media companies such as Facebook, did not create value, but created an unstable equilibrium where new customer growth was unsustainable. Its entire mode of operation is like a Ponzi scheme that will disintegrate within 5 years.

And no matter how sensational the argument may sound, some of the details of the media exposure have been noteworthy.

Just as the experience of pop diner of a press group, Groupon was referred to as excessive packaging. According to reports, a participant who wrote a group buy copy for Groupon said he had never been to the racecourse, but still wanted to write a realistic experience of the racecourse and attract users to trade.

The problem is more than that.

A magazine recently disclosed Lefkofsky's past. Currently, Lefkofsky is Groupon's biggest shareholder, with a 22% stake in the company's IPO.

Looking at the history of Lefkofsky, the magazine notes, there are several points to be found: High revenue growth accompanied by big losses, like selling stocks at an early stage and being sued by creditors and investors.

Sources said Lefkofsky and his family had already set up 382 million dollars before Groupon submitted an IPO.

The worry of high friends

"We have experienced rapid growth in emerging markets in the short term, but we do not know whether these markets can continue to grow, or whether they can sustain the current growth rate." Groupon's prospectus says.

In fact, Groupon and Tencent, Yunfeng funds set up a Chinese joint venture, group buying site high friends also met the challenge.

Mason last week visited three markets in China, Japan and South Korea.

During his stay in China, Mason was a low-key. After a few minutes of speeches from a handful of Chinese media, Mason hurried away with "I have an important meeting".

In the eyes of Mason, Gao Peng Coo Ouyangyun "has very strong leadership in high friends."

Ouyangyun told reporters that Mason was "very satisfied with the Chinese market".

But the reality is that the top 2.5 months of the Chinese market have been challenged.

May 11, high-PEER network published micro-Bo lottery results, but by netizens exposed black-boxes operation, internal staff won the prize. The next day, Gao Peng admitted that the lottery is indeed a loophole, the company will be the lottery, and dismissed the responsibility of the company's vice president and related staff.

Gao Peng's China team is also trying to change the past, Ouyangyun to reporters, Gao Peng has acquired 2 to 3 small group buying sites.

As for the Ponzi scheme, Ouyangyun told reporters, Groupon statistics showed that more than 70% of the thousands of merchants said that Groupon brought in a repeat customer, and they were willing to continue to work together, "in China's high friends, back to continue to go to the top of the merchants countless." ”

Angel investor Shire that there must be some high valuations in the domestic group buying field, but relatively speaking, the domestic group buying website still has strong confidence in the group buying market.

Handle Network CEO Wu told reporters: "In fact, group buy site profitability is not a problem, we can always realize cash flow is positive, the key is how to continuously improve the site's ability to become realizable." ”

And the United States Group Network stressed that the site should be more honest, and put forward some specific measures to prevent group buying fraud.

"It's more important to do your own business and to improve the user experience, because group buying is a long-distance run," said Wang, CEO of the US Mission network. ”

Zhou Jia Zhangjingko