PEG 2.0

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Groupon critics are insane

So, Groupon is going public today.

For that, I did a roundup of BI’s analysis and reporting on Groupon, which you can check out here. It’s probably the best single place on the internet if you want a serious overview of Groupon’s business and its prospects. 

During this, I realized two things:

1- Business Insider has almost certainly had the best coverage of Groupon of any outlet in the world, both in terms of reporting and analysis. 

2- Groupon’s critics, and the animus against Groupon, is insane. Just insane. 

Whatever else, Groupon has accomplished amazing things; it’s invented a new industry, it’s outgrown literally hundreds of rivals, it’s created tremendous benefits for consumers and stakeholders… And it’s a whipping boy. Why? Because anyone who’s successful fast on the internet must be a fraud. It’s twisted.

It’s fine to criticize. It’s fine to be skeptical. Groupon certainly isn’t above reproach, and I’ve criticized the company many times, and you’ll find that BI’s coverage of the company is nuanced, raising red flags where appropriate. Maybe it’s wrong. But it’s not naive. The rest of the commentary on Groupon, meanwhile, is just insane.

And so you read that Groupon is a Ponzi scheme. Why not the mob? The Gestapo? Insane.

When Groupon first posted its numbers, the (understandable, but misguided) refrain was that because it lost so much money, it had to be doomed. And faced with the outcry, Groupon slashed down its marketing spend and showed that, in fact, it can easily be profitable. What was the response? Groupon’s growth screeched to a halt! It’s doomed! Yes, because critics bullied them into hitting the brakes and giving them what they wanted, which was profits. Now that profits are here, there must be something else to hate about Groupon. Insane. 

Another thing that made people howl when Groupon went public was its “Adjusted CSOI” metric which doesn’t count marketing spend. The horror! Groupon has fraudulent accounting to fool people into believing it’s profitable! (Nevermind the fact that the GAAP numbers are posted right alongside them.) Meanwhile Business Insider reporting revealed what I suspected all along, which is that Adjusted CSOI is not some made-up thing, but the key metric Groupon executives themselves use to measure the business. And so what happened in Groupon’s latest filing? Adjusted CSOI was out! That’s crazy. Of course Adjusted CSOI isn’t the single metric you need to look at to understand Groupon’s business (Hint: Rule #2 of company analysis is that a single metric is never enough to understand a business. (Rule #1 is: always read the footnotes.)), but bullying Groupon into whithholding a key metric it uses internally to measure its business is absolutely, categorically insane.

A few days ago, we published a deep, nuanced analysis of Groupon’s business that raised a number of concerns but also ultimately concluded that Groupon will be a sustainable business. Maybe it’s wrong, maybe it’s right. Meanwhile, we published an AP story, excerpting as headline a dumbass quote from some analyst: “Groupon Is A Disaster.” The story went WILD. It went viral, with hundreds of thousands of visitors and hundreds of comments. Insane. 

Insane insane insane. 

It’s insane and it’s (sorry to use nasty words) un-American. I feel like I’m in France, where “behind every fortune there is a great crime” and if you’re successful then you must be somehow a fraud. The Groupon backlash means it had to delay its IPO at slam the brakes on its growth. America has capital markets deep and resiliant enough that a company should be able to raise money by saying “We are going after this enormous opportunity and so we’re going to invest(lose) tons of money getting there. And maybe we might never get there. Don’t buy if you don’t want to take risks. But this is what we’re doing and why, and here’s our Adjusted CSOI and here’s why we’re spending tons on marketing (hint: we have hundreds of competitors and our biggest competitive moat is scale). Let’s go.” And it’s fine to have a couple guys shouting “Ponzi scheme” from the bleachers because all opinions should be aired and we definitely need skepticism. But this mob lynching is insane. 

Here’s to a face-ripper Groupon IPO and a $100 billion market cap in 10 years. 

Notes about this post from the Tumblr community:

  1. pegobry posted this