Groupon founder Mason could be self-destructing

Investors have lost patience as the daily deal site's results keep missing, and the board could be mulling a change already.

By Jonathan Berr Feb 28, 2013 11:25AM
Andrew Mason, CEO of Groupon. Credit: Johannes Simon/Getty Images

Updated 2:30 p.m. ET

Shares of Groupon (GRPN) plunged 21% in afternoon trading Thursday following the daily-deal site's latest earnings disappointment as investors continue to doubt CEO Andrew Mason's strategy. Worse, it appears the company's board is also concerned enough to be considering his ouster.

The Chicago company reported a net loss in the latest quarter of $81.1 million, or 12 cents a share, from $65.4 million, or a 12-cent loss, a year earlier. Revenue rose 29.7% to $638.3 million. Wall Street expectations were for a loss of 2 cents on sales on sales of $640 million. Not surprisingly, Groupon also issued disappointing earnings guidance.

Mason, the founder who has run Groupon since its inception in 2008, seems to be living on a different planet than his investors. During the earnings conference call, he mentioned that "our results reflect the deliberate and aggressive focus on growth of our platform and segment market share as well as our willingness to trade off short-term operating profitability." Whenever companies talk about enduring short-term pain for long-term gain, investors flee their stock (except, of course, for Amazon.com (AMZN).

In Groupon's case, this is especially problematic because it has been slashing fees that many customers pay for their "Groupons." Many businesses have complained that they lose money on the Groupon deals they offer and that the coupons do nothing to encourage brand loyalty. Worse, larger companies such as Amazon are taking business away from Groupon as well.

Not surprisingly, Groupon's board is losing patience with Mason, who has knack for saying the wrong thing at the wrong time, and has considered replacing him, according to Bloomberg News.

"At the November board meeting, directors decided to give Mason a few more quarters before beginning a search for his successor," the news service says. "The lower-than-predicted forecast for the first quarter may bode ill for his prospects."

Ya think?

--Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter @jdberr.

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18Comments
Feb 28, 2013 1:07PM
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"Many businesses have complained that they lose money on the Groupon deals they offer and that the coupons do nothing to encourage brand loyalty."

Why do companies then offer Groupon's?   I know 2 of our favorite restaurants we did not know about until we got a Groupon.
Feb 28, 2013 2:03PM
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The problem I have with Groupon and all the others is they don't build long term customers.  A Groupon customer goes from one deal to the next and will never go to a merchant without a coupon.  how does that help any business???  I have owned several businesses including a coffee shop, tried it once (against my own better judgement) and it did exactly what I though, lost me money and did not bring in any long term customers.   It was interesting when it started, but 9 out of 10 businesses won't sign up because they know the facts a coupon/groupon/livingsocial customer only comes WITH A COUPON!
Feb 28, 2013 1:27PM
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The Groupon type of idea is kind of cool but I didn't see this as an investment even when the stock was going up... it just seems too much like a flash in the pan to me... if popularity wanes, then they're screwed.  Maybe that's what's happening.  I know I did a few and am not as enthusiastic now.
Feb 28, 2013 4:47PM
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In my opinion the groupon is not there to make you money.  It is for exposure.  If you offer a great product then through groupon your company is exposed to new people.  If the people like what you are offering then they will come back.  If you are offering something that is very marginal which I find that to be the case majority of the time, then I am not coming back.


Feb 28, 2013 2:57PM
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I stopped using them because they sent WAAAAAY too many emails. Even after I asked that they stop, I had to send another email asking again, because they still kept coming. It would have been nice if you could choose how many you 'd like to receive each month or something like that.
Feb 28, 2013 4:17PM
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I am loyal to Groupon, their customer service is the best amongst the competitors hence why I prefer them. As for loyalty to the merchant, I would never have visited them without the Groupon deal, yes the discount enticed me, but now it’s your job as the merchant to retain my business. Very few allow for a reason to return.  Out of the many I have tried, I always recommend the ones that like and when my pockets are fat enough to pay full price I will return.   
Feb 28, 2013 3:24PM
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Groupon is basically email marketing with offer that will surely lose money for the store in the offer. For all that there is no loyalty. It may be better to buy email list and mail offer to people.

 

Groupon may be good where product cost is zero like for clubs who is seeking membership. People pay for a commitment in time. In that time if they like it clubs got some residual customers unlike for merchandise store. Also Club what ever money they get is money in a bank since there is no cost of the product itself.

Feb 28, 2013 4:23PM
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I bought a groupon a couple of months ago. for a house cleaning deal.  I have tied to contact the company twice now to set up an appointment, but to no avail.  I really need their services, and have the potential of becoming a regular customer, if we can work together to fine something that will work for both of us, but I have heard nothing from them after sending two rather long explanatory messages.  Actually, I want them to either contact me, or give my money back, but I don't know how to get a response from the company, nor from groupon!
Feb 28, 2013 3:35PM
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Every time I hear the name of this company, I think of the perverts in China on subways trying to touch (Grope) school girls!
Mar 1, 2013 11:01AM
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Could any of this stock slide be due to their idiotic approach to the 2nd Amendment?  I quit buying because they stopped offering anything to do with shooting sports.
Feb 28, 2013 3:46PM
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For a non necessary service, execution is key. Besides the multi emails every day annoyance, I had a hard time using one at FAO Swartz. It was $20 and I couldn't buy something for $19.99!!! And candy didn't count :( I'd still try a higher price deal but it can be too much hassle to save a few bucks.
Mar 4, 2013 11:24AM
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This is the problem with couponing in general. Customers become conditioned to only purchase if they have a coupon. When's the last time you bought a pizza without a coupon? Not until companies started offering coupon prices on their menus (Pizza Hut, Dominos, etc).

 

Others have made the point that coupons are for creating exposure, and that exceptional value brings people back. This is true. Most firms, however, start buying Groupons because their business is suffering and they are hoping to get a boost. If the value is there, the business would not likely be suffering. Coupons as part of a launch strategy are appropriate - but without the value, you're sunk.

Feb 28, 2013 9:21PM
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Guy quit I believe. I dumped them early on and was glad I did. Just another overpriced CEO who is out of touch with the real world
Feb 28, 2013 8:33PM
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For those of you who are not aware. When a company begins to see a sign of struggling business, they offer coupons to help drive people in. Whether it's Groupon or any other merchant coupon, it's the idea of the merchant to offer the deal. Groupon just happens to be the, food or any other item, dating site. I use Groupon and whenever the restaurant offers the deal, we go. I had a problem with a merchant that wouldn't respond to my calls for a reservation, contacted Groupon, they refunded the money in Groupon bucks and told me the contacted the restaurant. Be it, they are closed for remodeling. Can't ask for more than that. I am a very happy consumer with Groupon, but as any business, you will have your pros and cons.
Feb 28, 2013 12:08PM
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I  used to shop 3 times a week or more.  NOT ANYMORE. I walk in the store they do not have the same brands that I like. They used to have them 2   years ago. I grew with this store.  This an American Icon.  NOT ANY MORE I WANT JCP OF 2 YEARS AGO.  YOU ARE FIRED TO JOHNSON

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