Groupon’s most recent financials aren’t looking so hot, which has economists wondering whether the company that started the daily deal deluge might be in trouble. Though the company’s been courted by Google and raised nearly a billion dollars in financing earlier this year, at no point in its existence has Groupon ever made a profit. So the company’s recent decision to remove their Adjusted Consolidated Segment Operating Income (ACSOI) numbers from their financial statements — a measurement of profits before they’re adjusted to factor in subscriber-acquisition costs and stock-based compensation — does not bode well, according to financial analysts.
Vin Vacanti, who runs the (rather addictive) site Yipit.com, looked at the Groupon’s Boston market recently for evidence of this, and saw a tremendous dip in the Groupons sold per subscriber and the revenue earned per merchant. “These two metrics suggest that Groupon’s bottom line is in trouble,” writes Jay Yarow at Business Insider.
Rob Wheeler at the Harvard Business Review goes a step further, questioning not only the business model but Groupon’s raison d’etre in a recent blog post. “Deep down, Groupon knows what we all know: good investments are profitable investments,” he writes. “Groupon’s fundamental problem is that it has not yet discovered a viable business model.” Wheeler argues that a major thing missing from Groupon’s business plan is that their insane focus on growth hasn’t netted an improved experience for the user. The notion of a deal “tipping” is pretty much over, and it doesn’t operate like a social network which only gets better when everyone joins. Not only that, but buying deals doesn’t make life better for the user over time; there’s no incentive structure to keep buying from Groupon, which is a problem as the market gets more and more flooded with copycats.
But with all that money flowing in, who has time to worry about making a profit, right? Not so much. Groupon apparently needs $750 million in it’s IPO to keep the company solvent. Now if someone can come up with a deal site for that, they’d have a pretty impressive business on their hands.