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.
Google’s hiring spree to be felt in Cambridge
By Hiawatha Bray, Globe Staff
The Cambridge office of search engine giant Google Inc. has grown to employ more than 300 people, and now it’s making room for more. The company is recruiting local engineers, advertising managers, and administrative staff — all part of a global hiring spree, the biggest in Google’s history, with plans to hire more than 6,000 workers worldwide this year.
“The Boston area is home to a wealth of talent and we’re excited to continue to grow our presence in the region,” said Brian Schmidt, director of online sales at Google Cambridge.
Already, Google’s employment website lists a host of openings in Cambridge, including software engineers, product managers, advertising account executives, technical support engineers, and even a specialist in hiring new workers. The Google office in Cambridge employs sales personnel for the company’s vast online advertising business. Also on board are engineers who work on the company’s flagship Internet search service, the Android operating system for cellphones and tablet computers, and Google’s network of high-powered computer centers scattered across the globe.
At the end of 2010, Google employed 24,400 people around the world, so the new hires amount to a 25 percent increase in personnel in a single year. According to the company’s official corporate blog, Google plans to recruit workers “across the board.” That covers a lot of territory; apart from the company’s dominant position in online search, Google is involved in a vast array of other businesses. It owns the hugely popular YouTube video site; develops the Android operating system; has launched the Google TV project to combine Internet and television viewing; is building Chrome, a new computer operating system to rival Microsoft Corp.’s Windows; and is developing new social networking products to compete with market leader Facebook. And underneath it all, Google must manage and expand the online advertising business that generated the bulk of its 2010 revenue of $29.3 billion.
Carl Howe, director of consumer research at the Yankee Group in Boston, said that Google will likely concentrate on enhancing its products and advertising services to work better on mobile devices. “They want to capture even more of the five billion consumers who own mobile phones around the world,” said Howe. “Only about a billion and a half people own PCs.”
Google won’t say exactly how many people it is hiring, either locally or worldwide, although the company’s outgoing chief executive, Eric Schmidt, said in Germany on Tuesday that the company will bring on more than 1,000 new workers in Europe this year. But on the Google blog, senior vice president of engineering and research Alan Eustace said hiring this year would exceed the previous peak year of 2007, when Google brought on more than 6,000 new workers. The company’s 2011 hiring plans are a big step up from last year, when Google recruited more than 4,500 new workers worldwide.
Google Unveils Fast Flip and Startups Take a Gamble
By Jennifer Martinez | Monday, September 14, 2009
Google today launched a new feature that organizes articles on the web in a way that resembles print magazines, called Google Fast Flip. Marissa Mayer, the search engine giant’s VP of search products and user experience, who unveiled the feature at TechCrunch 50 this afternoon, explained that Google founder Larry Page had questioned why the web wasn’t similar to a print magazine, where the content is already available for you to read as soon as you turn the page. Using the Google Fast Flip page, people can click on a topic — say, entertainment — and scroll through small screenshots of articles on that topic from various sites, such as (in the case of entertainment) Us Weekly, People and Seventeen. Click on an article to view a larger image of it and a second time to read it on its original site. Or you can simply scroll through a string of articles from 30 well-known news brands, including the Washington Post, Slate and BBC News, publishers with which Google will share advertising revenue.
Prior to the Fast Flip unveiling, however, startups focused on advertising and monetization took the stage to show off their wares to a panel of judges, which included Mayer and Zappos’ CEO Tony Hsieh. Two of the startups that presented, SeatGeek and Rackup, have a gambling-like feel. For sports fans and concert goers, SeatGeek forecasts for users the prices of event tickets on secondary markets, such as StubHub and eBay — and takes a 7-10 percent cut of each sale. Rackup, meanwhile, holds online auctions that take place over very short time periods (e.g. 60 seconds) during which people can bid for gift cards to their favorite stores. And it adds a sweetener: It will increase the money value of the gift card a person is bidding on based on how early they placed their bid and the size of it relative to other competitors in the auction.
Microsoft, Yahoo agree on long-sought search deal
Microsoft Corp. has finally roped Yahoo Inc. into an Internet search partnership, capping a convoluted cat-and-mouse game that dragged on for years.
The 10-year deal announced Wednesday gives Microsoft access to the Internet’s second-largest search engine audience, adding a potentially potent weapon to the software maker’s Internet arsenal as it girds for an all-out assault against online search and advertising leader Google Inc.
The extended reach will allow Microsoft to introduce its recently upgraded search engine, called Bing, to more consumers. The Redmond, Wash.-based software maker believes Bing is just as good, if not better, than Google‘s search engine. Taking over the search responsibilities on Yahoo‘s highly trafficked site gives Microsoft a better chance to convert Web surfers who had been using Google by force of habit.
“Microsoft and Yahoo know there’s so much more that search could be,” said Microsoft Chief Executive Steve Ballmer. “This agreement gives us the scale and resources to create the future of search.”
In return for turning over the keys to its search engine, Yahoo will get to keep 88 percent of the revenue from all search ad sales on its site for the first five years of the deal, and will have the right to sell ads on some Microsoft sites.
Yahoo estimated the deal — which the companies hope to close next year — will boost its annual operating profit by $500 million and save the Sunnyvale, Calif.-based company about $275 million on capital expenditures a year because it won’t have to invest in its own search technology.
Assuming it can pass antitrust scrutiny, the alliance could give Yahoo a chance to recoup some of the money squandered in May 2008, when it turned down a chance to sell the entire company to Microsoft for $47.5 billion.
Yahoo’s market value currently stands at about $24 billion. Yahoo just came off a tough quarter in search advertising, with its revenue in that niche falling 15 percent in the April-June period.
The two rivals began talking about a possible alliance as far back as 2005 before Microsoft intensified the courtship with last year’s attempt to buy Yahoo.
It took Yahoo’s current chief executive, Carol Bartz, just six months to strike a deal with Microsoft — something that neither of her predecessors, Terry Semel and Yahoo co-founder Jerry Yang, seemed interested in doing.
Shortly after her arrival, Bartz made it clear she was willing to farm out Yahoo’s search engine for “boatloads of money” as long as she as thought the company would still receive adequate information about its users’ interests.
“This agreement comes with boatloads of value for Yahoo, our users, and the industry, and I believe it establishes the foundation for a new era of Internet innovation and development,” Bartz said.
Under the agreement, Yahoo will have limited access to the data on users’ searches — which yield insights that can be used to pick out ads more likely to pique a person’s interest. The value of that information is why Microsoft wants to process more search requests.
Like Yahoo, Microsoft has invested billions in its search technology during the past decade, yet remained a distant third in market share while its online losses piled up. The company’s Internet services division lost $2.3 billion in the fiscal year ending in June, nearly doubling from the previous year.
Microsoft is counting on Bing, unveiled in early June, to turn things around.
Bing has been getting mostly positive reviews and picking up slightly more traffic with the help of a $100 million marketing campaign. Analysts believe Bing’s successful debut pushed Microsoft to reopen negotiations so it could expose its search engine improvements to a wider audience more quickly.
“The reason the deal happened now is the recent success of Bing. I think it put pressure on Yahoo, as well as Yahoo not being able to turn it around on its own,” said Gartner Inc. analyst Neil MacDonald.
Even with Yahoo’s help, Microsoft still has its work cut out. Combined, Microsoft and Yahoo have a 28 percent share of the Internet search market in the United States, well behind Google‘s 65 percent, according to online measurement firm comScore Inc. Google is even more dominant on in the rest of the world, with a global share of 67 percent compared to a combined 11 percent for Microsoft and Yahoo.
It could be a while before Microsoft and Yahoo can begin working together because the partnership is likely to draw federal antitrust scrutiny to ensure the combination won’t have an adverse effect on competition in the online ad market.
The U.S. Justice Department spent five months dissecting a proposed search advertising partnership between Google and Yahoo before concluding that it would give Google too much control over the market.
Microsoft used its lobbying muscle to spearhead the campaign against Google teaming up with Yahoo, so it wouldn’t be a surprise if Google turned the tables.
Under the Obama administration, the Justice Department is promising to pore over technology deals far more rigorously than it did when the proposed Google-Yahoo partnership came up.
Just getting Yahoo to succumb to its latest advance represents a coup for Microsoft and the boisterous Ballmer, who were rebuffed for so long.
Microsoft is doubling down on Internet search at the same time Google is attacking Microsoft’s bread-and-butter business of making software for personal computers.
Google is working on a free operating system for inexpensive personal computers in a move that could threaten Microsoft’s ubiquitous Windows franchise. If it gains traction, Google’s alternative, called Chrome OS, could divert some revenue from Microsoft while the software maker is trying to grab more of the money pouring into search advertising.
Chrome OS, though, isn’t supposed to hit the market until the second half of next year. That means Microsoft could get a head start on Google in the duel to steal each other’s financial thunder.
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Jessica Mintz reported from Seattle.
Google Digging Deeper to Improve Search Results
SAN FRANCISCO
Google Inc. is about to add more features to its already dominant Internet search engine — and some of the changes could give Web surfers less reason to click through to other sites. That scenario might upset the creators of the material highlighted in Google‘s results.
For instance, one of Google’s new tools will assemble the work of other Web sites into a spreadsheet-style format.
Unlike Google’s traditional search results, the spreadsheet experiment, called “Google Squared,” doesn’t simply show a set of Web links related to a search request. Instead, it fishes through Google’s massive database to organize pertinent facts and other content in rows and columns.
In a Tuesday demonstration that was webcast, Google showed how a search request made about small dogs through the Squared tool will display pictures next to extensive descriptions about different breeds, on Google’s own site. The content was imported from other Internet destinations.
The Squared results show where the information originated, so people can still quickly go to the original source, said Marissa Mayer, Google’s vice president of search products. She emphasized Google is trying to keep its millions of users happy by helping them make more “informed clicks.”
Google already is under attack by newspaper publishers who contend the company unfairly profits by showing headlines and story snippets pulled from their sites. Mountain View, Calif.-based Google maintains that its practices adhere to copyright laws and that it provides ways for newspapers to block their content from being indexed by its search engine.
Other revisions coming to Google will include more details, or “snippets,” posted under Web links in the search results. And there will be new options that will enable users to confine the results to a specific time period or category, such as product reviews.
The changes are expected to roll out in phases during the next few weeks.
Although Google sells ads all over the Web, the company rakes in its largest profits when people click on the marketing messages that appear alongside its search results. That is one reason Google is still trying to widen its lead in Internet search, even though it already processes nearly two-thirds of all U.S. queries, according to comScore Inc.
Even as it has laid off workers, cut back perquisites and closed unpopular services to help boost its profits during the recession, Google has vowed to keep investing in research and development.
“We are always striving for the ideal or perfect search engine,” Mayer said. She believes Google is about 90 percent toward its objective, but expects the final 10 percent to be the most difficult.
The technology does misfire, as Google readily acknowledged Tuesday. As part of the sneak peek at Squared, Google showed how a request for information about vegetables returned a spreadsheet that included a row for the sport of squash.
