reDesign

August 15, 2011

The terrible numbers that Groupon doesn’t want you to focus on

Filed under: groupon — Rakesh Agrawal @ 4:14 pm

Note: If you have Groupon or other daily deal experiences to share, please email dailydeals@agrawals.org.

Even in its revised S-1 issued last week, Andrew Mason’s letter directs potential shareholders to three key metrics: gross profit, free cash flow, and the much laughed at adjusted CSOI. (The fact that they still mention this dog should tell you tell something.) Two of these three metrics are, in a word, crap. They paint an extremely optimistic view of the business.

Gross profit (what I consider revenue) is the only one that is a useful measure of the company’s fortunes. And the growth rate on that has plummeted.

Also read my editorial on how Groupon is trying to hide these numbers from investors.

Here are some numbers that Groupon doesn’t want to focus on.

Revenue and subscriber growth

  • The median number of Groupons sold to each Groupon customer (someone who has bought anything): 1.
  • The median number of Groupons sold to each person on Groupon’s mailing list: 0.
  • Sequential revenue* growth from Q4 2010 to Q1 2011: 76%.
  • Sequential revenue* growth from Q1 2011 to Q2 2011: 26% (a drop of 50 percentage points in one quarter).
  • Sequential growth in Groupons sold from Q4 2010 to Q1 2011: 73%.
  • Sequential growth in Groupons sold from Q1 2011 to Q2 2011: 16% (a drop of 57 percentage points in one quarter).
  • Sequential growth in featured merchants Q4 2010 to Q1 2011: 62%.
  • Sequential growth in featured merchants from Q1 2011 to Q2 2011: 38% (a drop of 24 percentage points in one quarter).

Revenue share to Groupon

  • Average revenue share to Groupon (what Groupon calls “gross margin”) in Q1 2011: 42%.
  • Average revenue share to Groupon (what Groupon calls “gross margin”) in Q2 2011: 39%.
  • Revenue share that American Express is expected to take in its Facebook deal: 3-4%.
  • Reasonable expectation for Groupon’s revenue share in the long term: 10-20%.

Subscribers and acquisition cost

  • Percentage of mailing list who has purchased even one Groupon: 20%.
  • Cost per new list subscriber: $5.37.
  • Cost per new customer: $24.08.
  • Real revenue per subscriber: $3.43.
  • Real revenue per customer: $17.55 (less than acquisition cost — keep in mind most people buy only 1).
  • Real revenue per Groupon sold: $10.49 (less than acquisition cost).
  • Amount spent on marketing, full year 2010: $241.5 million.
  • Amount spent on marketing, first half of 2011: $345.1 million.

Merchant liabilities

  • Amount owed to merchants Q1 2011: $290.7 million.
  • Amount owed to merchants Q2 2011: $391.9 million (a 35% increase).

Sales effectiveness

  • Average sales per sales rep, Q1 2011: $172,000.
  • Average sales per sales rep, Q2 2011: $138,000.

Staffing

  • Ratio of Groupon employees to Facebook employees: approximately 3:1.
  • Ratio of Groupon editorial employees to Groupon technical employees: approximately 3:1.
  • Growth in headcount from Q1 to Q2: 35%.
  • Growth in sales headcount from Q1 to Q2: 37%.
  • Growth in editorial headcount from Q1 to Q2: 27%.
  • Growth in technology headcount from Q1 to Q2: 50%.
  • Percentage of Groupon employees employed in technology: 4%.

Misc.

  • # of purported class actions against Groupon: 16 (up from 15 in 1Q).

* This is based on net revenue, what Groupon calls “gross profit”.

Also see these stories about how soon Groupon could collapse (not written by me):

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26 Comments »

  1. [...] The terrible numbers that Groupon doesn’t want you to focus [...]

    Pingback by Roundup of my Groupon and daily deals coverage « reDesign — August 16, 2011 @ 10:07 am

  2. Thanks for a fascinating post, Rakesh. A quick question: you noted that AmEx is rumored to be taking a 3-4% fee in its deal with Facebook. That sounds in the ballpark of the regular fee they charge merchants for accepting their cards. I’m curious if you’ve heard what rev share Facebook is expected to take in that deal. That might be more comparable to Groupon. Which you alluded to in a way when saying that rev shares would trend down to 10-20% (as opposed to 3-4%). Thanks again for a great post.

    Comment by Jim — August 17, 2011 @ 9:22 am

    • That is the standard AMEX transaction fee. Neither AMEX nor Facebook is charging merchants anything extra for using the deals platform.

      Comment by Rocky Agrawal — August 18, 2011 @ 5:10 pm

  3. Are these numbers derived from their S-1?

    Comment by John — August 18, 2011 @ 3:42 pm

  4. Yes, all of these numbers are either taken directly or calculated based on the information in the latest amendment to Groupon’s S-1.

    Comment by Rocky Agrawal — August 18, 2011 @ 3:52 pm

  5. [...] “The median number of Groupons sold to each Groupon customer (someone who has bought anything): 1.” [...]

    Pingback by Groupon Trouble « Coupon Bonanza! — August 22, 2011 @ 1:10 pm

  6. over what period are the figures based on?

    Comment by Lee — August 23, 2011 @ 3:04 am

  7. Ok lets make that post sound a little better. Over what period are you saying that 20% of GroupOn mailing list purchase a voucher?

    Comment by Lee — August 23, 2011 @ 3:06 am

  8. [...] The terrible numbers that Groupon doesn’t want you to focus on [...]

    Pingback by An open letter to Andrew Mason: You’re wrong « reDesign — August 26, 2011 @ 3:01 pm

  9. An open letter to Andrew Mason: You’re wrong…

    Dear Andrew, I must admit I was surprised to read your letter to employees yesterday. I say this because I’ve reached out to your PR team in the course of covering Groupon and they’ve often used the excuse that you’re in a quiet period to refuse to com…

    Trackback by Quora — August 26, 2011 @ 10:32 pm

  10. [...] The terrible numbers that Groupon doesn’t want you to focus on [...]

    Pingback by There are only two deal companies that matter: Facebook and Google « reDesign — August 30, 2011 @ 9:10 am

  11. [...] of the daily deal dogpile, but a statistic that MacMillan did not include was that Groupon’s average sales per sales rep dropped from $172,000 in Q1 to $138,000 in Q2–seemingly good justification for why Yelp is reallocating its sales staff to other [...]

    Pingback by Offermatic — August 30, 2011 @ 5:48 pm

  12. [...] In the latest amendment to the S-1, Groupon also reported that its revenue per sales rep declined from $172,000 in 1Q2011 to $138,000 in 2Q2011. [...]

    Pingback by Groupon deal performance: down and to the right « reDesign — September 12, 2011 @ 9:13 am

  13. [...] it worth it? By my estimates, Groupon spent $24.08 for each new customer acquired in the second quarter. Between giving money to Google for advertising and giving money to [...]

    Pingback by The economics of LivingSocial/Whole Foods-like deals « reDesign — September 13, 2011 @ 6:21 pm

  14. [...] public stock offering was put on hold—ostensibly due to market “volatility,” but these numbers about the comany’s performance may not have helped. The Chicago Tribune reports this morning that the IPO will happen, but not [...]

    Pingback by Portland News headlines for Sep 17 2011 : Travel tips, hotels, restaurants, jobs and news | Travel 2 Portland — September 17, 2011 @ 8:35 am

  15. [...] Given how most media outlets report the headline revenue numbers, it’s an important change in shaping the public perception of the company. Breathless headlines calling Groupon the fastest growing company in history were largely driven by relying on misleading metrics like gross revenue. (I’ve done all of my analysis based on net revenue numbers.) [...]

    Pingback by Groupon’s cost of revenue is soaring « reDesign — September 24, 2011 @ 3:51 pm

  16. [...] ejemplo de esto último es lo que le está sucediendo a Groupon y a otras empresas similares, que viven con costes de adquisición muy altos. El objetivo último [...]

    Pingback by El motor de tu modelo de negocio: Coste de adquisición y Valor del cliente | Estrategia, Startups y Modelos de negocio — April 24, 2012 @ 12:07 pm

  17. [...] before Groupon’s IPO, there were signs that this was a concern. In Q1 2011, the average sales per sales rep was $172,000. In Q2 2011, this dropped to [...]

    Pingback by Top sales talent leaving Groupon as its woes mount | VentureBeat — May 3, 2012 @ 9:05 am

  18. [...] before Groupon’s IPO, we saw signs that this was a concern. In Q1 2011, the average sales per sales rep was $172,000. In Q2 2011, this dropped to [...]

    Pingback by Top sales talent leaving Groupon as its woes mount | Share Blog — May 3, 2012 @ 3:04 pm

  19. [...] before Groupon’s IPO, we saw signs that this was a concern. In Q1 2011, the average sales per sales rep was $172,000. In Q2 2011, this dropped to [...]

    Pingback by Groupon Is Losing Top Sales Talent (GRPN) | Don't Call Me Tony — May 4, 2012 @ 9:24 am

  20. [...] had predicted Groupon’s dim future, but the voices are getting much louder now, and Groupon’s sales force are starting an [...]

    Pingback by Back online and “Groupon, told you so” « Brandr — May 5, 2012 @ 2:53 am

  21. Is there I site were I can see all the numbers like how Maney sales they did in the first month they opened groupon

    Comment by Sol — June 6, 2012 @ 9:01 am

  22. Coffee tables that are made from solid hardword since they last longer and can resist high loads. ;.,.;

    Our favorite internet page
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    Comment by Rivka Krites — October 11, 2012 @ 7:24 pm

  23. [...] de que la rentabilidad que saquen de los mismos sea superior al coste de adquirirlos… aunque existen serias dudas sobre si esto es [...]

    Pingback by ¿Entiendes el motor de crecimiento de tu modelo de negocio? | Estrategia, Startups y Modelos de negocio — February 5, 2013 @ 12:35 am

  24. [...] de que la rentabilidad que saquen de los mismos sea superior al coste de adquirirlos… aunque existen serias dudas sobre si esto es [...]

    Pingback by ¿Entiendes el motor de crecimiento de tu modelo de negocio? | La Factoría De Negocios — February 18, 2013 @ 12:39 pm

  25. I think everone knows now about Groupon being a flop of a business. It’s just too labur intensive to have healthy margins. I’m supprised that they have not made a biger focus on India, China and the BRICs.

    Comment by jamessandberg1 — February 24, 2013 @ 9:42 am


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