Gini Dietrich

My Groupon Prediction

By: Gini Dietrich | December 6, 2010 | 
130

I’ve been thinking a lot about Groupon walking away from the $6 billion offer from  Google on Friday night. Our guest blogger today, Rusty Speidel, and I had a text message marathon  about it after it happened and I asked him to give his perspective on the deal. So I don’t want to steal his thunder, which will publish at noon central time today.

But I’m trying to figure out why this is bothering me so much. It’s like when Laci Peterson was killed and I became obsessed with her trial. I didn’t know her.  We didn’t even live in the same part of the country. Yet I read and watched everything I could get my hands on and couldn’t wait for the guilty conviction to come down on her husband. I’m obsessed about Groupon turning down $6 billion like I was obsessed with Laci Peterson.

You see, I know people who work over there. I’m an entreprenuer in Chicago, which (with this deal) could easily become another Silicon Valley. The founder, Andrew Mason, is just 30 years old. I hope to sell Project Jack Bauer in five or six years. I’m educating myself on angel and VC funding. So I think I’m obsessed for all of these reasons.

But the main reasons I think I’m obsessed are because I’m a woman (and all of the large deals like this are typically run by men), because I cannot imagine ever walking away from $6 billion, no matter what I thought the valuation of my company was (especially if I had some serious competitors biting at my heels like Groupon does), and because I’m a leader who runs a business with openness and transparency so I cannot imagine having to go back to my team today to get them motivated to keep working hard, even though they all thought they were going to be buying themselves cruises and cars for Christmas this year. What a morale deflator.

Of course, I’m not sitting in the board room so I don’t know what really happened, but I think this reaks of arrogance, greed, and plain old stupidity. And I don’t think it was the founder who turned them down. I think the VC firms who got involved in October smell more money and they couldn’t come to terms with Google. I mean, $6 billion is more money than three generations can spend. Not only that, but they likely would have created a fund to invest in other Chicago start-ups so their money would have made even more money.

I’ll let Rusty tell you why turning down $6 billion is dumb, but I will say that Groupon, while it hasn’t reached its prime, is the fastest growing company ever, and is a cool idea, it is an easily replicable business.

My prediction? I think Google launches their own local online coupon model, Groupon decreases in value, two or three competitors gain steam on them, and $6 billion is lost forever.

About Gini Dietrich


Gini Dietrich is the founder and CEO of Arment Dietrich, an integrated marketing communications firm. She is the author of Spin Sucks, co-author of Marketing in the Round, and co-host of Inside PR. She also is the lead blogger at Spin Sucks and is the founder of Spin Sucks Pro.

  • rwohlner

    This will be interesting to follow as it plays out. I’m not that savy regarding internet business models but I would tend to agree that there are low barriers to entry in this business. Chicago as another Silicon Valley is an interesting concept.

  • barrykahan

    I think they have been watching too many interviews with Marc Zuckerberg. 6 billion…yeah but after taxes what do they have LOL.

  • sydcon_mktg

    I am also intrigued by this! You are right they have competitors biting at their heels. It’s amazing how many people contact us daily to build group buying sites. I also think you are right we will see Google have their own. $6 BILLION is a insane amount of money to turn down, it reflects on the era of greed and entitlement.

    I will be interested to see how this plays out down the road, and am interested to read the guest post later today.

  • HowieSPM

    Technically in Finance when it comes to buying and selling there is always a winner and a loser. Yes Win-Win happens but normally one side Wins more even if they both Win.

    So I want to give you the shrewd investor viewpoints:

    Groupon – they have been sent feelers by other companies and have someone who personally knows another bid is coming hoping a bidding war starts vaulting the price up significantly. Unless they have this information they are crazy for not selling. I agree with Gini if that checkbook is open….

    Google – They obviously feel Facebook Places/Deals needs to be countered (whoever said FB was going to win this battle anyway?). Or, they feel a bubble is coming and they want to flip Groupon at a higher price (this would be more a private equity type deal than a company buying another company purely for short term investment gains.

    There could be a real bubble forming with a lot of companies selling out in the next 12-18 months. Google technically knows as much or more about us than Facebook. So would it cost more or less than $6bil to start their own version of Groupon? If they ran the numbers and they came out higher to start something internally, that would justify them paying $6bil.

  • timjahn

    Is it such a bad thing that somebody didn’t sell for the big money and wants to keep working on something cool?

    Are we all really that shallow?

    (I have no idea if that’s the case, but I think I hear more jealousy circling around than I do real thoughts on the matter. “WHAT?! Are you CRAZY?! If I WERE YOU…”

  • NancyMyrland

    It is true: There are low barriers to entry with this model. I have two friends here in Indianapolis who have started their own group-buying companies. The software is being sold right and left.

    HOWEVER, it will take a long time to build the brand that Groupon has, the infrastructure of a marketing machine that exists, and the knowledge and school of hard knocks that Groupon founders and employees can now run. This doesn’t mean it can’t and won’t be done.

    My business background tells me those in the boardroom know a heck of a lot more than we do, and are playing some awfully crafty cards, and a game of strategy vs. chance that they think will pay handsomely in the future. I think it’s too early for any of us to know whether this was a good or a bad deal. On the surface, it’s unbelievable, but Groupon is run under the surface where we can’t see. It will be very interesting to watch what happens next.

  • Jeff_Rutherford

    As you and several commenters have mentioned, there is no barrier of entry whatsoever to Groupon’s business model.

    I think turning down Google was a very unwise move too.

    Warren Buffet has mentioned several times that he likes companies that have a unique, profitable business with a very, very wide moat – meaning it would take someone tons and tons of money, energy, and execution to replicate the company’s business.

    Groupon’s moat is a non-existent. What’s to stop local version of Groupon popping up all over the place. Where I live, Western Mass, local businesses would immediately deal with a locally-owened group-buying site vs. Groupon. Some would argue, local versions would never be able to scale. Yeah, but what’s to stop a local version of Groupon if that local business is perfectly contented with not scaling and making a modest profit.

    Groupon is huge today, but so was AOL and MySpace in their day.

  • Doug_Davidoff

    I don’t know Groupon’s business model so I have no personal understanding of how easy or difficult it would be to copy them. I do know that companies don’t offer to pay $6 billion for something that is easy to copy. Clearly Google thought it would “cost” more than $6 billion to build there own.

    There was another easily copied business model I remember. One where you could upload videos for free. Google tried to copy them with Google video. It flopped, and so the went ahead a bought You Tube.

    I remember when Microsoft bought Inuit (makers of Quickbooks and Quicken). Scott Cook, the founder said he agreed to the sale because he (and the VC’s) just couldn’t turn down the money. The Justice Dept. didn’t let the sale occur – good thing for Cook and Intuit as the company grew it’s worth to multiples of the Microsoft offer and continued to have great impact. Microsoft tried – and failied – many times to copy.

    Look I have know idea if turning down Google is a good idea or a bad one. Personally, I’ve gone from not caring about Groupon to rooting for them a bit.

  • dgulbran

    I don’t think that Google will necessarily join in the fray and launch their own site–although, I think it’s important to remember that Groupon’s only *apparent* advantage is first-to-market. There are already many “local” competitors (LivingSocial, Gleeday, Mulamu…) and I think there is still a lot of opportunity in the “group deal” space. I know Groupon has some patent protection, and there is the MobGob patent issues that still need to be resolved. Still, I’m not convinced it was a smart move on Groupon’s part. I recall when Digg was the end-all-be-all of community aggregator sites. They turned down money and have not only fallen slightly out of favor, they’ve had to cut staff. I do see that in Groupon’s future–unless they have something up their sleeves we aren’t aware of–could be. Who knows?

    I do know that it’s not hard for anyone to enter the space and do pretty much the same thing Groupon is doing. The assets Groupon has are customer loyalty, a solid sales org, and a head start. But none of those is such a strategic advantage that I think turning down $6B makes sense.

    I think it’s a big game of chicken. I think Groupon is going to do an IPO, and the hype from the Google offer will help them set a high price. At least, I think that’s what they are hoping. I could be wrong: I once ran a startup that turned down a nice offer in order to “go it alone”. Don’t ask how that worked out.

  • DonovanGroupInc

    I, too, am at a loss as to why $6 billion was not enough for Groupon here but as you say Gini we weren’t in the boardroom. It will certainly be interesting to see what the future holds but I think one thing is for sure it is definitely a high stakes roll of the dice on Groupon’s point – just hope it doesn’t come up snake eyes. Cheers, Andy

  • CLGraphics

    OK – so… yeah, maybe turning down $6bill is not what most of us would consider to be the smartest move. Maybe though, Gini, as you referenced in your other post, the $ aren’t the end-all be-all of this particular deal.

    As an example: My father-in-law just recently sold his company. Part of the deal was that he stay on for a specific amount of time with out an option to walk away until the time period was fulfilled. This was a sticking part of the deal that had nothing to do with the sales $ and had to be revisited a number of times until both parties were in agreement. Of course he wasn’t talking $6bill, but it was still a comfortable sum.

    I would like to have been in the board room on this one. Frankly, it may not matter to them whether it’s $6bill last week, $4bill next week or $10bill next month. When you’re talking this kind of money, what’s another billion or two either way really matter? Sure, most anyone can preach me a sermon in an answer to that. But of those preaching that sermon… Are you the one who’ll be making the spending decisions with that money?

  • a_greenwood

    I’m thinking they believe they will make more in an IPO. Probably wrong if that’s the plan, but I think it’s a factor.

  • JoyFull_deb

    @a_greenwood I’m with you….I think they are waiting for IPO, which may come soon. #justsayin

  • Eee-yup. 🙂

  • dgulbran

    @CLGraphics Oh, believe me, a billion or two either way matter a great, great deal–especially to Groupon’s investors like Digital Sky and New Associates. There’s a lot about the deal we don’t know; one thing I know with utmost certainty: Andrew Mason did *not* make this call in a vacuum–or on his own.

    The only thing that really makes sense (and does more so when you look at the investor track record) is an IPO. Groupon thinks it can do better in an offering. I dunno. Maybe they can, maybe they can’t. Time will tell and it will either be heralded as “the smartest move in business” or lambasted as a colossal mistake. One thing is certain: we *will* know eventually.

  • @timjahn Hey there mate,

    I don’t think it’s shallowness as much as it is looking at the business side of it. People compare it to Facebook not selling when they were approached. The difference is, Facebook never really had any comparable models to go with, so their uniqueness made them a more attractive proposition.

    Groupon, on the other hand, has a ton of clones (some that have a much better UI and engine) that Google, or anyone, could buy and slam Groupon with.

    As everyone here has said, we don’t know the reasons behind the non-sale. But playing with fire when there are many more lighters in the game seems kinda strange.

  • They won’t raise 6 billion in an IPO. Even Google’s own IPO only raise a little over 1.5 billion, and gave a market cap of 23 billion. And this was after publishing that they had profits in 2003 of somewhere over the 100 million range.

    VCs shoot for a ideal goal of 10x investment. Usually it amounts to about 2-3x. Anything over that is gravy, at least from the VCs I’ve had the pleasure of dealing with. At 35x investment, I’d say there probably are other factors involved.

    Let’s not forget that there have been Google acquisitions in the past that have not gone anywhere. Foursquare was born from Dodgeball, that was acquired by Google and nothing was done with it. You also lose significant business when you re-brand. It depends on what their end goal is and how far their taking this.

    Would I have walked from the six billion? Never. I’d give them the keys, say… good luck, God bless, and go laughing to the bank with my 30%. But that’s just me.

  • CLGraphics

    @dgulbran OK … so if it is an IPO that’s in mind, and everyone posting here thinks that’s a huge mistake – how many of you will buy if/when that IPO is offered? Me? Nope. My investment $ are pointed in other directions.

  • Doug_Davidoff

    Not to belabor the point, because again I don’t really know anything about Groupon or it’s competitors.

    BUT, several people are slamming Groupon because their model and approach are so easily copied. If that were really true then Google would not pay $6 billion for them. They’d be far more likely to buy one of the “other” guys for a lot less, give them to Google brand and go at it. There’s clearly something there (at Groupon). What it is or what it’s worth – I have no idea. I’m sure we’ll find out in time.

  • @Doug_Davidoff Groupon might have an easily copied model, but they’re the most established with the best relationships with vendors so far. This gives them significant advantage. And considering their employee base and such, there are hurdles but no different than any other company. Google would buy them for those relationships instead of bothering to establish brand new relationships.

  • dgulbran

    @Doug_Davidoff Clearly, there is a lot there. There’s much we can see: solid management, meteoric popularity, profitability, some IP (Patents), a sales for already in place, the market advantage of being there first. But none of those are *unattainable* by a competitor. Facebook had a huge advantage over competition: once the user base grew, people were invested in the site; moving meant re-forging all those personal connections and losing content (pictures, journals, etc.). Groupon doesn’t have that; they have a customer base that consists of bargain shoppers. A bit of a fickle bunch. Of course Google would rather acquire what Groupon has, rather than build it from scratch. Who wouldn’t? Buying vs. building also has another major strategic advantage: it stops someone else from buying them.

    In the end, though, Groupon is now on the hot seat. If they stumble, or if a competitor does manage to capture some of their mojo, they are going to have trouble.

  • @CLGraphics @dgulbran I don’t think it’s a huge mistake. I do believe that if VCs are thinking they’ll raise more than 6 billion in an IPO, they have something else coming. But, in an IPO, you don’t look towards that. You’re looking at market cap and all sorts of other factors. If Groupon did reject the acquisition truly for $6 billion for an IPO, then they have something else in mind.

  • dariasteigman

    I’m with you, Gini. It struck me as stupidity and hubris all rolled into one because (1) I thought the price was an over-valuation and (2) Google was offering premium for a working model. Other companies are doing what Groupon does, and one of them might just strike lightening in a bottle. Or be bought out by Google, which then builds it into a powerhouse competitor — with deep pockets for backing.

    Of course, this probably guarantees I’ll be wrong. 🙂 But I’d hate to be an employee looking at my big payday doing down the drain.

  • I believe that Groupon will increase in value in the next short-term (1-2 years) by continuing to acquire competitors overseas. They will file an IPO in order to cash out their investors, which include Mail.ru Group (formerly known as Digital Sky Technologies), Eric Lefkofsky, Brad Keywell as well as other VCs (3rd series of funding already!)

    Andrew Mason will make a fortune and continue to lead Groupon as CEO until he walks away once he realizes that running a public company is not as fun as a running a young Internet start-up. Groupon and its competitors will eventually reach a market saturation point for group-buying deals, at which point the business model must be diversified in order to avoid a complete collapse. (This is already evident with the recent news that Gilt Groupe is launching a full-price mens site > http://mashable.com/2010/12/01/why-gilt-groupe-is-getting-into-full-price-retail/).

    Winners: Andrew Mason and his pre-IPO investors
    Losers: Public shareholders

    That’s my gut instinct, but I could be very wrong. What are your thoughts? Do you agree or disagree?

  • CLGraphics

    @darkmoon @dgulbran I’m sure they do have something else in mind. I should have pre-qualified my remark in that last statement – “everyone posting here (excluding me)…” …. I think @PhilipNowak above has keyed in with what seems an almost prophetic statement.

    We can all play arm chair wheeler dealers here – but down to brass tacks there’s nothing in this entire thread that’s not pure conjecture. Pure assumption. And, perhaps, Groupon will wrap things up in a way that makes the ‘assume’ rule bear true.

    It’ll be interesting to watch this all play out.

  • CLGraphics

    @PhilipNowak So… thinking about adding the title of ‘Prophet’ at the end of your name? What you posted here makes a lot of sense.

  • timjahn

    @PhilipNowak I think you’re probably right Philip. Good insights.

  • timjahn

    @Dannybrown I understand the “anybody can copy Groupon” argument, but thus far, nobody has been able to take them over. Yet, I suppose. The king of the hill can’t always remain king of the hill.

    I think the biggest loser here is Chicago. That amount of cash would have been an extremely beneficial influx into the tech ecosystem here, which has been gaining great steam over the past 2 years.

    Groupon has already done a ton for the community here (and continues to), so it’s not a total loss. But this would have been great for the community.

  • Doug_Davidoff

    @darkmoon And *that* is precisely my point. The distribution, the relationships and the knowledge that Groupon have is not “easily” copyable.

  • Doug_Davidoff

    @dgulbran I’m not saying that it’s unattainable (I’m not even saying Groupon is smart to have turned down the offer); however if it were truly copyable all anyone would need to do to grow a business would be to hire away another comapnies salespeople. Most businesses that have tried to do that, however have failed. If you look at their business model, their key asset isn’t the bargain shoppers it’s the advantage they have with the local businesses that make those offers.

  • With the scope of the way my brain works I can’t think of any reason to not sell this relatively new company for 6 billion dollars. The only answer I can think of is it’s really not about money, more about passion and objectives that are still to be met. That seems very idealistic though, it probably is as you suspect Gini – Greed, Arrogance and Stupidity.

    Still scratching my head, another movie in a couple of years to rival “The Social Network”?

  • @timjahn Good point, mate. Everyone’s thinking about the board and employees, but like you say, there’s benefits for the community too. Cheers, sir!

  • @CLGraphics Ha, thanks for the new title. 🙂

  • @timjahn Thanks Tim! BTW, I saw your Christmas website. Amazing. I can’t imagine what your power bill is for the month of December. 🙂

  • “Of course, I’m not sitting in the board room so I don’t know what really happened, but I think this reaks of arrogance, greed, and plain old stupidity.” – gini dietrich

    Exactly. Regardless of actual or perceived valuation (as you said), this guy just looked someone in the eye and said, “No,” when they offered him 6 billion dollars. I tried to wrap my head around that and I couldn’t. I understand that sometimes, offers aren’t the right offers or the timing just isn’t right. But let’s be honest: unless you’re currently worth more than 6 billion dollars, there is no such thing as bad time or a wrong offer when you’re offered 6 billion dollars.

  • $6 billion could not have been easy to turn down. Stupid? Maybe. I really don’t know who’s decision it was or what they were thinking. But Groupon is apparently topping $2 billion in annual revenue, and if you take that in consideration, in addition to their mind-boggling rate of growth, I think there could be a lot of reasons to turn down $6 billion. I’m sure it was a very tough decision to make, but I can only assume that a lot of thought went into it. I’m excited to see what happens in the next few months!

  • @jmatthicksgini dietrich
    Jeremy, I agree with you. I could live on $500k annually for the rest of my life and have access to everything my heart desires. At some point, it becomes more about power, ego and the ability to change the world (for some at least). When I see these power players in the tech and digital media space (http://en.wikipedia.org/wiki/Allen_%26_Company_Sun_Valley_Conference), I can’t help but think of the plot from the James Bond movie ‘Tomorrow Never Dies.’ (http://en.wikipedia.org/wiki/Tomorrow_Never_Dies)

    I saw an interview with Eric Lefkofsky (largest Groupon shareholder) recently about the fact that Groupon will make him a billionaire soon. His quote: “There comes a point where you reach a level of success, financial or otherwise, when you just kind of stop counting because, counting, it just doesn’t change things,” Lefkofsky said in an interview Thursday, before the decision to reject Google became known. http://bit.ly/fVGtOl

  • MSchechter

    I’m not a huge fan of “amen” comments, but I have to agree with everything you said here. While I am sure there is a ton of opportunity and a ton of options for them in the world right now, it does seem as if they are not the one of a kind island that can afford to take that kind of risk. That said, who knows what is on their roadmap that we haven’t even heard of. If they continue to get major partners like the Gap to continue to jump on board, they could theoretically become unstoppable. That said, it does seem like Google will now either buy someone else or jump into the frey… I cannot imagine them turning their back on this, especially with their recent improvements to Google Places…

  • @PhilipNowak From that same article:

    “He still has a good chance to do so, but only if the company keeps the momentum going and eventually sells shares to the public, a decision sources say Groupon isn’t expected to make until next year.”

    I’m not willing to risk 6 billion dollars on an “if.”

    “But Lefkofsky calculated that even if they signed more than 100 universities, their annual sales would only be $10 million. And that was too small for Lefkofsky’s ambitions. So he moved on.”

    I can respect that, but at the same time, that’s greed creeping in.

    The guys sounds like an incredible business mind; his track record proves that. But I just can’t justify turning down 6 billion dollars on an “if,” a possibility. Maybe he’ll turn this into 10 billion, 30 billion, 50 billion…but I just don’t see that and I’ll happily eat crow if I’m wrong.

  • @JonHearty What would be interesting is to know how much of the turnover is profit. It’s great having a high turnover in revenue, but a high turnover in revenue if your costs are high too? Not so much. 😉

  • @Dannybrown you make a great point. $2 billion is a huge number, but it is still relative to their expenses. I guess we’ll have to wait until an IPO before we can find out for ourselves!

  • TMNinja

    Not sure what I think of this decision.

    From the surface, it does look like Groupon made a big mistake.

    I don’t see any reason why their biz is worth that valuation. Name and all.

    Will be interesting to see where they are in 5 years.

    – Craig

  • janbeery

    Gini,
    You are spot on! About 15 years ago I worked with a smaller medical manufacturer who built a product from scratch into a multi million dollar company! They made knee braces. At the time, every orthopedic surgeon was bracing their patients pre and post op. The business was unbelievable! We all were making money hand over fist!
    The owner was offered 38 million dollars for the company by a much larger medical manufacturer. Offer was declined! He was convinced he could get more! Then, standard of care changed with improved surgical procedures and rehab. Bracing after one presentation at an ortho conference changed everything! Standard of care no longer required the same protocol.
    The company ended up selling for under 5 million! Greed is a terrible disease that never has a happy ending!
    Groupon is an easily replicable business with enhanced improvements that could make it better. Hmmmm! Maybe we’ve got something here!

  • jsandford

    I would love to see Amazon buy Groupon. Think of the possibilities for actual products versus services that are hyperlocal. Possibly more than $6 billion in opportunity over the lifetime of the existence of the model in that scenario.

  • Groupon is already losing value with its customers. There are two or three other deal sites out there doing a better job with content AND customer service than Groupon.
    Totally agree with you.

  • Groupon is already losing value with its customers. There are two or three other deal sites out there doing a better job with content AND customer service than Groupon.
    Totally agree with you.

  • @jsandford If there was a way to give 5 thumbs up to this idea, I would.

  • @jmatthicks That quote right there blew my mind. 🙂

  • BobReed

    While Groupon is already losing value, I think the entire business model the company practices will peter out. How many companies go back to Groupon for a second pass? Curious to see those numbers. I’ve been reading accounts that the discounts are effective for artificially bumping up sales, but not so much delivering ongoing customers. Moreover, companies are saying that they’re losing money on the deals. The long-term viability of this glorified loss leader strategy is questionable.

  • @jmatthicks @jsandford It would be cool for Amazon to buy Groupon, but they don’t have the cash. There were rumors about them acquiring livingsocial , another Groupon type company. Instead they invested $175 million: http://bit.ly/eOaSY What makes these deals ridiculous is that it seems too easy to successfully replicate the product. I would have taken the $6 bil and run for sure!

  • @JennaLanger @jsandford I’m not sure anyone could buy Groupon if they said no to 6 billion dollars. That said, you’re right…Amazon doesn’t have that kind of cash. But I am a HUGE Amazon fan and would love to see them seamlessly integrate Groupon into their everyday business.

    And I second you on taking the 6 billion and running…I’d already have run all the way to my own private island off the coast of New Hampshire by now.

  • jsandford

    Group deals have been around for ages for tangible products; get enough people together and companies give the group rate. It would work well and they could offer multiple items each day/week. Groupon probably turned down Google because it just seems like a semi-solid pairing, IMHO.

  • JackMonson

    Groupon is worth far more than the $6 Million price. Wait, what? Billion with a B?

  • @JackMonson Exactly Jack!

  • ginidietrich

    Phew! Long day, plus I had to go to the doctor because now I have a sinus infection. So now I am going to read all of your comments! Stay tuned…

  • ginidietrich

    @Dannybrown @timjahn I’m with Danny. I’m not jealous…I just don’t understand it. Did we not all live through the dot com bust?! This smacks of it. Badly

  • ginidietrich

    @Dannybrown @timjahn I’m with Danny. I’m not jealous. I don’t get it, from a business perspective. Like I said in the blog post, and Danny says here, if they had no competition and felt like their value was more, I’d say MORE POWER TO YOU! But this smacks of the dot com era when investors were throwing crazy money at companies for “eyeballs” and then losing it all to bad investments…hence the bust. You’d think we’d learn our lesson.

  • ginidietrich

    @rwohlner I would love it if our city becomes the next city to watch!

  • ginidietrich

    @barrykahan Uh…$3.5B??

  • ginidietrich

    @HowieSPM OMG! You weren’t the first comment here today. ARE YOU OKAY?!?

  • ginidietrich

    @NancyMyrland I agree, Nancy. Which is why I said I’m not in the board room so I’m just speculating. And they are playing a game…one I don’t think they’ll win in the long run.

  • ginidietrich

    @Jeff_Rutherford Smart, smart comment. #thatisall

  • ginidietrich

    @Doug_Davidoff I think they offered as much as they did because they see Groupon has already created a $14B LOCAL marketplace. One that Google hasn’t been able to do yet. So that’s why they were interested. But there are at least four companies who are biting at the heels of Groupon, which is going to quickly decrease their value.

  • ginidietrich

    @dgulbran Won’t it be interesting to see if they IPO?! This stuff is just fascinating.

  • ginidietrich

    @DonovanGroupInc I’m predicting snake eyes. Though I’ll be willing to admit I was wrong (for the first time in my life) if I am.

  • ginidietrich

    @JoyFull_deb @a_greenwood Well, if it’s an IPO and they get more than $6B, I’ll eat crow.

  • ginidietrich

    @darkmoon And after I deposited by 30%, I’d go to Italy and drink wine for a year. And then I’d come out of hiding and invest some of that money in other entrepreneurial companies.

  • ginidietrich

    @dariasteigman Can you imagine being a Groupon employee who, last week, was ready to buy a new car or go on a cruise and this week have nothing to show for it? i mean, you should never count your chickens before they’re hatched, but I would not want to be the leader in the business that has to go to work on Monday and face that.

  • ginidietrich

    @PhilipNowak The only way I see them succeeding, now, is if they IPO. No other company has the money to compete with $6B, let alone more. I hope they do…our city needs it! And I’m willing to say they’re wrong if they do.

  • ginidietrich

    @hackmanj As rustyspeidel said in his guest post today – “they’ve already made the one social networking movie they’re going to make.”

  • Doug_Davidoff

    @ginidietrich I understand that there are many competitors at their heels. Certainly taking Google’s bid would be the safe choice (though while everyone here is saying they turned down cash, I’d be suprised if most of the purchase weren’t stock – and as you mentioned in a previous post Google may be in a “death rattle).

    My point is that I don’t think it’s as simple as “Holy Cow!! $6 billion – Hell yes!!” There are many companies, Intuit and Microsoft among them, that could have taken the safe road and taken the big dollars. They didn’t, it was predicted that they’d fail and they changed the world. For what it’s worth – while I wouldn’t be buying their stock – I hope they make $6 billion look like chump change.

  • ginidietrich

    @PhilipNowak @jmatthicks And you guys have proved my point. I know Mason didn’t make this decision by himself, but I’d be livid with my investors if I had to say no to $6B. L-I-V-I-D!

  • ginidietrich

    @Doug_Davidoff No, I get that – it’s not that simple. But reports were it was $5.3B in cash and $700MM in performance bonuses. That’d be enough to keep me motivated working for someone else for a couple of years. I guess I just have a really hard time wrapping my mind around turning down SIX BILLION DOLLARS!

  • ginidietrich

    @JonHearty @Dannybrown Danny made my point. You can have $2B in revenue, but not make any money. I’ve heard reports that their profit is more in the $300MM range. So is it worth 20 times profit?! I doubt it…but I guess they think so!

  • ginidietrich

    @MSchechter Amen! LOL! meganbeausang and I were looking at how much cash companies have sitting around. Only Apple has this kind of money to be able to increase the offer.

  • ginidietrich

    @TMNinja Or even in a year!

  • ginidietrich

    @janbeery Your story makes me so, so sad. That being said, I know A LOT of entrepreneurs who just can’t give up their businesses, no matter what the offer. It might be a generational thing, but Baby Boomers built businesses as lifestyle. My generation builds businesses as a way to a means. Should we build the next Groupon?

  • ginidietrich

    @JennaLanger @jmatthicks @jsandford Sorry – Amazon only has $5.3B in cash sitting around.

  • ginidietrich

    @paigeworthy I’m going to have a plaque made that says, “Paige Worthy rocks the house!”

  • ginidietrich

    @BobReed You’re exactly right, Bob! I spoke on the Crain’s small business forum panel in October and we talked about this. It’s great for a spike in sales, but maybe not at the risk of hurting your brand. But there are companies out there who have figured out the “return merchants” equation.

  • ginidietrich

    @hackmanj @JackMonson BILLION. Sigh…

  • DerekPangallo

    Groupon is nothing but a big, segmented email list, right?

    The deals, at least in my area, are nothing to write home about.

    Groupthink hysteria.

  • DerekPangallo

    Groupon is nothing but a big, segmented email list, right?
    The deals, at least in my area, are nothing to write home about.
    Groupthink hysteria.

    http://twitter.com/derallo

  • barrykahan

    @ginidietrich @JonHearty @Dannybrown Top line means nothing. Much smaller scale but I had built a business grossing about a million. Prefer not to discuss bottom line 🙁 . Suffice to say I know longer have that business. That should be enough of an answer.

  • FollowtheLawyer

    @DerekPangallo That’s my impression on both counts. No discernable barriers to entry, and a surfeit of yoga, pilates, day spa and nail salon deals.

  • HowieSPM

    @ginidietrich @HowieSPM i was busy didnt you see my tweets of food and NYC debauchery? So yes woke late. =P Plus had to do my Gini Dietrich Tagging Crew graffiti tour of the Bronx on my way back up north.

  • FollowtheLawyer

    @BobReed When I recently tendered my Groupon at a restaurant, the waiter rolled his eyes. Basically, they were not gaining new customers through the promotion, just giving steep discounts to regular customers (like me).

  • @barrykahan @ginidietrich @Dannybrown

    Was Mark Zuckerberg foolish/stupid/greedy for turning down Yahoo’s $1 billion offer when the company had next to NO revenue and wasn’t even CLOSE to profitable? I’d say no. I think it was difficult for him to turn down the offer, but he saw the bigger picture. Is Groupon Facebook? Certainly not. But I think only time will tell whether or not this was a good decision.

  • @timjahn
    Tim, sounds like wisdom from the book of Jason Fried and Bill Gates. Why must every tech entrepreneur sell or go public? If they are enjoying what they are doing, why couldn’t they continue to grow and create new products/services for the long haul like companies used to do?

    I believe the answer to this question as far as Groupon goes is simple: Andrew Mason never intended to run this company past a certain point. During his keynote at SocialDevCamp Chicago this summer, he stated that tech companies “start to suck after a few years.” I think Andrew wants to do other things, whether it’s traveling the world, enjoying his self-made wealth, starting another company or finally getting his social cause site ‘The Point’ to actually make a difference in the world.

    In my opinion, perhaps the biggest tell-tale sign that Groupon will be sold or go public is how much funding they have accepted from VCs. These investors want their money back at some point and natural revenue growth is too slow of a cash out method for them. In fact, Mail.ru (formerly Digital Sky Technologies) won’t even invest in a company that doesn’t plan to go public or at least stand a great chance of being acquired. I remember hearing somewhere that Jason Fried advised Andrew Mason against taking VC money– that he should strive to make Groupon a long-term business on his terms without the influence of so many investors.

    It sure doesn’t seem that that’s the case, but who knows. Andrew Mason could very well prove all of us wrong and become the next Richard Branson of Virgin– eclectic, worldly and one hell of a savvy businessman.

  • jsandford

    @ginidietrich @JennaLanger @jmatthicks @jsandford I don’t think that cash is Groupon’s concern, obviously. It may actually be that Google wasn’t a good fit for them for the future. Amazon just might be.

  • meganbeausang

    I’m curious if Dick Fuld is a part of these negotiations. (Sorry…couldn’t help myself!)

  • meganbeausang

    @janbeery Thank you for sharing this real world example that just because you think you are worth more doesn’t necessarily mean you will get it. Coming from the world of financial services, I’m shocked and disappointed how many deals are driven by ego and not real financial analysis. I wonder how much money is left on the on the table that could go to innovation and better yet, employee development?

  • @jsandford @ginidietrich @jmatthicks There are some things we may never know, and why they turned down the deal might be one of them 🙂 But the Groupon Amazon deal will never happen now considering Amazon doesn’t have the money and they invested in Groupon’s biggest competitor.

  • HowieSPM

    I just can’t let this blog post miss the 100 comment mark! I just can’t!

  • HowieSPM

    @meganbeausang not that I notice these things but if you name your kid Dick often they become rich mean people…Fuld, Cheney. But if they choose Richard…whole different outcome..Branson, the Lionhearted. And if you choose Ricardo….well that is vaulting you to heights rarely seen in this world..Montalban.

  • HowieSPM

    @FollowtheLawyer @DerekPangallo The whole premise of isolating one deal was smart. But they go to your email inbox with all your other emails. I used to open the emails now I don’t open most of them. I think like what happened to Priceline is what is happening here. When Priceline went public at $14bil you could buy American, United, and US Airways. Today 13 years later its worth $11bil.

  • meganbeausang

    @HowieSPM Very perceptive. Maybe that is why Nixon went from Richard to “Tricky Dick” post-Watergate.

  • janbeery

    @ginidietrich I’m in! We’ll have our first strategy meeting over wine.
    I agree with you on the boomers. I walked from a great opportunity that would have been extremely lucrative. I opted for quality of life. I’m much happier and I’ve not looked back (well, maybe a couple of times.)

  • HowieSPM

    @meganbeausang I think he should of retired to Miami Beach and told everyone to call him Ricky. “Please, my friends call me Ricky”

  • ginidietrich

    @HowieSPM OMG! As soon as I hit “post comment,” we will be at 100!

  • ginidietrich

    @HowieSPM @meganbeausang Uh. The two of you are crazy.

  • ginidietrich

    @FollowtheLawyer @DerekPangallo What? You guys don’t get your nails done?!

  • ginidietrich

    @jsandford @jennalanger @JMattHicks I read an interesting theory this morning…they never had any intention of selling. They did it just to attract big investors as the company who turned down $6B from Google.

  • @ginidietrich @jsandford @jennalanger @JMattHicks So this could be a case of evil genius after all! Do they need more funding?

  • ginidietrich

    @hackmanj @jsandford @jennalanger @JMattHicks I would guess, without the buy-out, they’ll need one more round of financing. And if that’s what they did, it’s just pure brilliance. Talk about a game of chess!

  • FollowtheLawyer

    @ginidietrich @DerekPangallo Only in sandal weather.

  • ginidietrich

    @FollowtheLawyer @DerekPangallo HA!

  • @ginidietrich Your last comment just reminded me of one of my favorite movies: Training Day.

    “The (bleep) is chess, it ain’t checkers!” – Denzel Washington

    I second your sentiments: if that was indeed the purpose, they have earned my most sincere golf clap of appreciation.

  • rustyspeidel

    @DerekPangallo That’s kinda where I come down also. Fad.

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  • MikeKallay

    They should have taken the money and run, and here’s why:

    1: Groupon & this whole paradigm are becoming so saturated in the inboxes with product/service overlap.
    2: They don’t offer anything of value to the business owner other than a list of unknown demographhics — they essentially “rent” you a list to blast a loss leader deal for a huge fee. Facebook could absolutely *kill* Groupon whenever they jump into the fray, because they have the biggest database of opt-in personal information on the planet.
    3. Businesses are getting burned on the deals. I might have broken even on our $15 for $35 deal, or made a slight profit because 28% never redeemed, but it drove my regulars away for 3 months after the end, so overall it sucked the life out of my business. We are building it again like it’s 2007.
    4. People are realizing that they buy too many of these to use in a timeframe & throttle back purchases.
    5. Businesses know that by & large the typical customer these things bring in are deal hunters and will never return. The word has gotten out.
    6. The evidence is growing as to how many businesses actually closed during/after the deal.
    7. We’re still in the middle of this recession — the only real place a business like Groupon could grow so quickly. When we really start to recover, people will return to going where they want when they want.
    8. Businesses & their employees get angry during the redemption period for all of these reasons & it shows on their faces and in their service. Customers don’t get the best version of the business and unfortunately swear off the business, or even better, swear off the discount. Who wants to sit in a jam packed understaffed restaurant, wait 3x as long for your food/drink, only to save $10? I don’t.

    I believe that Groupon et al are destroying American businesses at the expense of their success and I won’t support them at all. I have unregistered my personal accounts from anything I was subscribed to, and I urge you to do the same. Patronize a business because you want to. Try a new restaurant because you’ve wanted to. If small business is the lifeblood of our society & economy, then Groupon & friends are the vampires sucking the very life out of it.

    Let’s get back to letting only the big stores do the deals they need to do because they can afford to do it. Jack’s Local Bistro cannot afford to do these deals and Americans are becoming accustomed to them and thus steer clear of Jack’s because they are getting a sweet deal somewhere else. I think that this paradigm could work for small business if the splits were more equitable (more in line with traditional advertising) and there were qualified databases to cull from. Just having an e-mail address and a valid CC doesn’t necessarily qualify you.

    Just my $.02 (I actually got a Groupon for my $.02, so I only paid $.01)

    /mike

  • HowieSPM

    @MikeKallay As with everything that has some investors or success and hope to cash in big with an IPO I think there is this romantic period going on. I agree with your nice post here. The question isn’t does Groupon have a place, can it make money etc. It’s can is be as big as they think they will be and I say no.

    I mean is this really any different than McDonald’s launching a new sandwich and putting buy one get one free coupons in your sunday paper? That said there is a new business I have been trying to gain as a client who is a very upscale Chocolatier in California. She was featured via on TV on the local Fox Station during the evening news via Groupon and has another TV spot coming. All for free (not sure why). She said it was a success but did not tell me how many customers bought the deal. But Groupon can’t get everyone who signs up on TV!

  • ginidietrich

    @MikeKallay I’m with you 120 percent! And now I see they’re going for $950 million in funding. The story I read yesterday certainly makes it sound like they are heading toward an IPO soon. I hope their market cap gets them more than $6B. I hope it doesn’t hurt other entrepreneurs in the process.

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  • Fred Smith

    I have worked with Groupon, Eversave, and Angie’s List Big Deal. They are all a scam. They want to take the lion’s share with 25-50% commission (they all shot for 50% then Groupon will nickle & dime you for credit card processing fees on top of that – which I am certain is against their contract with their CC processor to pass on those fees on to the customer). They, for the most part, want you to make a offer that really is no great offer and then publish that it at 50% off. They do try to make is sound above board but it is secondary as they just want the commission and will turn their head a bit. When dealing with these folks remember that they have a coupon mentality so they will nickle and dime to no end with the expectation that the business will not make any money on the deal. My experience with coupon customer is that there is no loyalty and little prospect of returned business as they are only interested in the deal, instant satisfaction and sometimes endup overpaying to get a “deal” (read Predictably Irrational, Revised and Expanded Edition: The Hidden Forces That Shape Our Decisions by Dan Ariely). Ebay has proven that people will many times over pay for the thrill of a win. Groupon will be inconsequential in they next 12-24 months. The equivalent of a one him wonder.

    • It’s too bad you don’t have an opinion! 🙂 I’ve heard the same about these sites and that they’re only good if you have excess inventory you want to get rid of. A friend of mine has a great story about the opera. Let’s just say the coupon clippers and the typical opera goers clash.

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  • MichelleTukachinsky

    Groupon has a great concept.. but tweaking it and making it better for BUSINESS… is key. Right now it is benefitting the consumer and the business (many really desperate for business in this economy) is making a huge sacrifice, hoping for repeat customers.

    There are better ways of doing this where both the consumer and the business come out as winners.

  • ginidietrich

    @MichelleTukachinsky I could not agree more!

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  • margoayn

    I have received THE WORST customer service from groupon. They clearly do not care about making me or my business happy. I have waited for over a month to get the date of my deal but to no avail. I have been blown off twice, I do not receive phone calls and now the clincher is I receive a youtube video showing me how another COMPLETELY unrelated business is soooo happy with the results from the groupon experience. Are you serious, Groupon? I could not feel less concerned about as a merchant and I am horrified with this experience. I have been waiting 5 weeks for information and I can’t get anything. I feel that they have just completely blown me off after I sent them all the information needed and numerous phone calls. FURIOUS.

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