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.
Updated 2:30 p.m. ETShares 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.
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.
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.
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