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):
Rakesh Agrawal's blog 
26 responses
[…] The terrible numbers that Groupon doesn’t want you to focus […]
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.
That is the standard AMEX transaction fee. Neither AMEX nor Facebook is charging merchants anything extra for using the deals platform.
Are these numbers derived from their S-1?
Yes, all of these numbers are either taken directly or calculated based on the information in the latest amendment to Groupon’s S-1.
[…] “The median number of Groupons sold to each Groupon customer (someone who has bought anything): 1.” […]
over what period are the figures based on?
Ok lets make that post sound a little better. Over what period are you saying that 20% of GroupOn mailing list purchase a voucher?
[…] The terrible numbers that Groupon doesn’t want you to focus on […]
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…
[…] The terrible numbers that Groupon doesn’t want you to focus on […]
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[…] 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. […]
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[…] de que la rentabilidad que saquen de los mismos sea superior al coste de adquirirlos… aunque existen serias dudas sobre si esto es […]
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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.