Corner of Berkshire & Fairfax Message Board

General Category => Investment Ideas => Topic started by: premfan on December 07, 2012, 12:54:19 PM

Title: GRPN - Groupon
Post by: premfan on December 07, 2012, 12:54:19 PM
I know know value investing board. What i'm i thinking?!  So we know all the problems with groupon and 80-90 percent drop since IPO. Lets look at the actual business economics.  After looking at the float/moat presentation i have a bit more clarity with it.

Groupon Goods=  Its the same business model as overstock.   The insane thing about it after one year in operation its rate run is about 1.5 billion. Thats impressive growth although its a low margin business. This shows the power of leveraging the groupon brand.

Daily Deal=  The daily deal is a high margin business where essentially it gives groupon "float" by getting an advance from customers ( buying the groupon deal). The float is costless cause they are the middlemen in the deal making process. They get a 50 percent split of the total deal. Is the float permanent? I would say yes unless all the customers demand a refund.

Negative working capital which means everything is financed by accounts payable and accured expenses.

Conclusion
I dont have the time to give more of a detail look into groupon, but bascially they create float to finance there business operations. The mistake groupon made is that they tried to grow to fast which elevated there sg & a. They havent reached critical mass yet but they will. Groupon is a innovative company that will create more businesses like groupon goods by leveraging there brand name. I think  groupon has zero chance of going bankrupt cause it finances there business with float not LTD.

Disclosure: long grpn ( its up 20 + percent today due to google takeover rumors. Its all noise )
Title: Re: GRPN - Groupon
Post by: Olmsted on December 07, 2012, 01:48:17 PM
The "float" from daily deals cuts both ways.  It's a blessing if that segment grows or stays the same, it's a big problem if that segment shows declining volume.
Title: Re: GRPN - Groupon
Post by: premfan on December 07, 2012, 02:05:30 PM
Right float does cut both ways. Groupon adds massive value to its merchants cause its the best way period from a ROI metric to bring customers in. Nothing else is even in the same arena except word of mouth referrals.  If there was a better way to get customers in believe me they wont be in business. Bringing new customers in is the most important thing by far for growing a business.  There are the best tool for bringing new customers in period in any type of advertising.
Title: Re: GRPN - Groupon
Post by: siddharth18 on December 07, 2012, 10:40:39 PM
I feel like I missed the boat on GRPN and GMCR. Both stocks that where overvalued once-upon-a-time. Then fell hard; very hard in fact.

At some point each company is worth SOMETHING even when they happen to be universally hated.
Title: Re: GRPN - Groupon
Post by: ItsAValueTrap on December 08, 2012, 03:02:37 AM
Aren't Groupon and GMCR very obvious shorts?

*I am short GMCR.  Both stocks have very high short interest.  The borrow on Groupon is ridiculous so I'm not that interested in shorting it.

Quote
At some point each company is worth SOMETHING even when they happen to be universally hated.
Most companies on the stock market eventually go bankrupt...
Title: Re: GRPN - Groupon
Post by: DCG on December 08, 2012, 06:23:56 AM
I wouldn't say their float (if you want to call it that) is priceless. They're paying their sales people a lot of cash to get these deals.
Title: Re: GRPN - Groupon
Post by: premfan on December 08, 2012, 07:03:26 AM
I wouldn't say their float (if you want to call it that) is priceless. They're paying their sales people a lot of cash to get these deals.

Hey great point.  Groupon is slowly starting to cut down there sales team due to automation of the deal making process. Groupon has reached a point where merchants know what they offer and they know it works due to testimonals in there field ( social proof). Since merchants know its the best way to bring customers in they have social proof which creates a sense of trust. There is less "selling" to create the deal. Merchants are seeking groupon and its not a demand problem its mostly a supply problem. They are still not in all areas of the market. The more automation of the deal making process the greater scale they can reach with less employees. If they can double or triple the merchants per account manager then that small change creates a "tipping point". Where the SG & A gets lower and they eventually reach all or most markets which creates HUGE increases in gross profit.  The mistake they made is they increased there workforce without the proper infrastructure in place to maximize there productivity per deal. So tipping point in overview for groupon is

Automation of deal process + more markets= less employees and HUGE increase in gross profit due to lowered SG & A per percent of revenue. 
Title: Re: GRPN - Groupon
Post by: siddharth18 on December 08, 2012, 02:15:37 PM
Aren't Groupon and GMCR very obvious shorts?

*I am short GMCR.  Both stocks have very high short interest.  The borrow on Groupon is ridiculous so I'm not that interested in shorting it.

Quote
At some point each company is worth SOMETHING even when they happen to be universally hated.
Most companies on the stock market eventually go bankrupt...

In hindsight, GMCR was a decent value at $18 a share...
Title: Re: GRPN - Groupon
Post by: writser on December 09, 2012, 05:33:19 AM
Was it a decent price because the stock doubled up in two months? Or was it decent value because the company was unreasonably valued? I'm not sure about the latter one. I'm also not sure about the integrity of management.
Title: Re: GRPN - Groupon
Post by: premfan on December 09, 2012, 09:07:24 AM
Was it a decent price because the stock doubled up in two months? Or was it decent value because the company was unreasonably valued? I'm not sure about the latter one. I'm also not sure about the integrity of management.


I think a better way to think of it is the market in the short term is a voting machine. The market HATES groupon and has already cased there ballot. Nothing is going to change that perception except sustainability. Everything is not sustainable. Until it eventually is or dies. So the question is what can happen to make groupon unsustainable and die? Please someone answer this and i can change my thesis.  The market is betting groupon wont be around in 2-3 years. I'm willing to take that bet based upon  my qualititave framework.
Title: Re: GRPN - Groupon
Post by: writser on December 09, 2012, 09:48:59 AM
My previous quote was referring to GMCR.

Regarding Groupon: as far as I know they haven't shown a profitable year so far so I would turn around your question into: "what can happen to make Groupon sustainable and live?". I have no clue: I don't see a strong moat, they don't make money and there are no barriers for competitors. On top of that they use(d) dubious accounting practices and there is no margin of safety in the balance sheet.

I have no strong expectations about the future either way (i.e. huge success or failure) so I would focus on historical results and from what I have seen so far this does not qualify as a 'value' investment for me. I'd rather buy ZYNGA if I want to speculate on growth: at least they have 3/4th of their market cap in cash and have shown that they can be profitable.

Title: Re: GRPN - Groupon
Post by: valueInv on December 09, 2012, 09:55:14 AM
Was it a decent price because the stock doubled up in two months? Or was it decent value because the company was unreasonably valued? I'm not sure about the latter one. I'm also not sure about the integrity of management.


I think a better way to think of it is the market in the short term is a voting machine. The market HATES groupon and has already cased there ballot. Nothing is going to change that perception except sustainability. Everything is not sustainable. Until it eventually is or dies. So the question is what can happen to make groupon unsustainable and die? Please someone answer this and i can change my thesis.  The market is betting groupon wont be around in 2-3 years. I'm willing to take that bet based upon  my qualititave framework.

There's a guy called Rocky Agrawal who has written extensively on Groupon's business model flaws at Techcrunch. Check his articles out. He essentially predicted the situation Groupon is in right now.
Title: Re: GRPN - Groupon
Post by: Palantir on December 09, 2012, 02:11:59 PM
These guys are generating FCF and have 1B in cash......tasty....
Title: Re: GRPN - Groupon
Post by: premfan on February 15, 2013, 04:23:06 PM
I love how Mr. Market in November was saying the business model is unsustainable and the company is going bankrupt when it was NO LTD. Its been a good spec so far ( the only spec in my portfolio).  It will be interesting to see if their European operations recover from the last quarter.  I love the service and its still by a mile the best way to get traffic in your business. 
Title: Re: GRPN - Groupon
Post by: Palantir on February 16, 2013, 11:16:13 AM
Dude this is undervalued. I need to revaluate my opinions.  I hope you bought this?
Title: Re: GRPN - Groupon
Post by: premfan on February 16, 2013, 11:57:57 AM
Its a  8 percent position and currently classifed as a spec. I need more info to make this a long term investment. Its still too early in the game. Also its next to impossible to value. 

My mental checklist while making the investment:

1.)Whos my partner? = Tiger Global and the big three who owns 20 plus percent of the company

2.)Whats the cataylst ? =  Continued revenue growth and the google "put". Google reportly offered 6 billion to buy company when revenue was in the 1 billion range.

3.)I'm i uncomfortable making this purchase?= yes to some degree. The best investments are when you are uncomfortable making them.

4.)Short term risk of bankrupty?= No. Company has no LTD

5.)Wall street consenous= Extremely overly negative. Wall street HATES the Ceo. Wall street thinks the company is going bankrupt ( remember no LTD) and its unsustainable. One of the most hated companies in recent memory.

6.)How big is there market= Massive. E-commerce and daily deals.

7.) Is it cheap?= YES. when i made the purchase the key metrics were silly cheap.



Title: Re: GRPN - Groupon
Post by: Palantir on February 16, 2013, 01:44:01 PM
What is your understanding of potential barriers to entry? How well are they handling mobile biz v desktop?
Title: Re: GRPN - Groupon
Post by: hellsten on February 21, 2013, 02:46:28 AM
What is your understanding of potential barriers to entry? How well are they handling mobile biz v desktop?

There's a Groupon clone in every city and country, but Groupon probably has some kind of minor moat.

Here's what happened to early investors in LivingSocial:
http://www.privco.com/livingsocial-receives-emergency-110m-cash-infusion-from-existing-investors-to-avoid-bankruptcy

Quote
Today's Participating Investors Effectively Now Own The Entire Company
Common Stock and Shares of Company's Employees Now WORTHLESS

(http://staticapp.icpsc.com/icp/loadimage.php/mogile/978171/b33bdb100dd8f0a1cd5f858307fc5085/image/jpeg)

IMO most social media startups and companies are/were basically scams at IPO (Zynga, Groupon, etc).

More on LivingSocial:
http://finance.fortune.cnn.com/2013/02/21/what-really-happened-at-livingsocial/
Title: Re: GRPN - Groupon
Post by: premfan on February 21, 2013, 07:21:45 AM
Agreed it was silly to play 10x revenue for the tech IP0's. Living Social was just a copycat of groupon. They tried to scale up fast and it was working for a bit. The problem with daily deals is its extremely easy to start but challenging to scale. The reason the scaling is challenging is due to the number of small businesses that meet the standards to do a daily deal. Its not like the trend has been job creation via small businesses. Also its compounded  due to banks being tougher with there loan requirements. So its a supply problem ( variety of deals) not a demand problem.

So there is a fixed piece of the pie that livingsocial and groupon were attacking. Groupon is the innovator and brings in the most traffic due to there collective buying model. Living Social doesnt do the collective buying model. The collective buying model triggers impulse buying and creates a sense of comfort in there purchase and a lack of buyers remorse. So when you see 500 other people buying that item or getting that deal it creates social proof.

Also groupon is pivoting constantly and  is  not strictly a daily deals company anymore. I'm thinking the e-commerce business will account for most of the revenue this year. E-commerce is intrinsically a low margin business ( unless its vertically aligned) so its vice versa of the deals business.  Its much easier to scale and creates another service in the groupon platform.

What i like about groupon is the platform that they are creating. They keep pivoting and entering new markets while increasing there platform ( by having more services for the customer).  Finally it does appear groupon creates "float". The "float" created has allowed them to pivot into e-commerce. Not like insurance float but, non traditional float.  Its the subscripton float model where a customer buys upfront for a groupon. The merchant keeps half and groupon pockets the rest. For every groupon purchased its ala a subscription fee for that service. I dont know if they changed this but, they used to wait 3 months to pay the merchants. So they have 3 months to gain interest on other peoples money until they give the merchant there cut.
Title: Re: GRPN - Groupon
Post by: DCG on February 27, 2013, 06:23:45 PM
Down 25% after hours after posting a loss.
Title: Re: GRPN - Groupon
Post by: premfan on February 27, 2013, 06:45:58 PM
At first glance numbers look solid. Although, the international business is severely lagging behind the  north american business. Not sure if this a trend or just indicates how bad everything in europe is. I think the markets expectation is still too high for groupon. I'll have to study the numbers more and listen to the conference call. But overall the numbers at first glance look solid and the market is mainly reacting to the Q1 guidance.
Title: Re: GRPN - Groupon
Post by: hellsten on February 28, 2013, 02:04:13 PM
Quote
People of Groupon,
After four and a half intense and wonderful years as CEO of Groupon, Iíve decided that Iíd like to spend more time with my family. Just kidding - I was fired today. If youíre wondering whyÖ you havenít been paying attention. From controversial metrics in our S1 to our material weakness to two quarters of missing our own expectations and a stock price thatís hovering around one quarter of our listing price, the events of the last year and a half speak for themselves. As CEO, I am accountable.
You are doing amazing things at Groupon, and you deserve the outside world to give you a second chance. Iím getting in the way of that. A fresh CEO earns you that chance. The board is aligned behind the strategy weíve shared over the last few months, and Iíve never seen you working together more effectively as a global company - itís time to give Groupon a relief valve from the public noise.
For those who are concerned about me, please donít be - I love Groupon, and Iím terribly proud of what weíve created. Iím OK with having failed at this part of the journey. If Groupon was Battletoads, it would be like I made it all the way to the Terra Tubes without dying on my first ever play through. I am so lucky to have had the opportunity to take the company this far with all of you. Iíll now take some time to decompress (FYI Iím looking for a good fat camp to lose my Groupon 40, if anyone has a suggestion), and then maybe Iíll figure out how to channel this experience into something productive.
If thereís one piece of wisdom that this simple pilgrim would like to impart upon you: have the courage to start with the customer. My biggest regrets are the moments that I let a lack of data override my intuition on whatís best for our customers. This leadership change gives you some breathing room to break bad habits and deliver sustainable customer happiness - donít waste the opportunity!
I will miss you terribly.
Love,
Andrew
Source http://news.ycombinator.com/item?id=5301146
Title: Re: GRPN - Groupon
Post by: stahleyp on February 28, 2013, 02:26:15 PM
"Iíve decided that Iíd like to spend more time with my family. Just kidding - I was fired today."

haha. epic.
Title: Re: GRPN - Groupon
Post by: Palantir on February 28, 2013, 02:33:08 PM
Brilliant. I love these guys and their sense of humor. Especially that "they cook a mean fish curry" Tibet ad.
Title: Re: GRPN - Groupon
Post by: biaggio on February 28, 2013, 04:32:59 PM
Quote
People of Groupon,
After four and a half intense and wonderful years as CEO of Groupon, Iíve decided that Iíd like to spend more time with my family. Just kidding - I was fired today. If youíre wondering whyÖ you havenít been paying attention. From controversial metrics in our S1 to our material weakness to two quarters of missing our own expectations and a stock price thatís hovering around one quarter of our listing price, the events of the last year and a half speak for themselves. As CEO, I am accountable.
You are doing amazing things at Groupon, and you deserve the outside world to give you a second chance. Iím getting in the way of that. A fresh CEO earns you that chance. The board is aligned behind the strategy weíve shared over the last few months, and Iíve never seen you working together more effectively as a global company - itís time to give Groupon a relief valve from the public noise.
For those who are concerned about me, please donít be - I love Groupon, and Iím terribly proud of what weíve created. Iím OK with having failed at this part of the journey. If Groupon was Battletoads, it would be like I made it all the way to the Terra Tubes without dying on my first ever play through. I am so lucky to have had the opportunity to take the company this far with all of you. Iíll now take some time to decompress (FYI Iím looking for a good fat camp to lose my Groupon 40, if anyone has a suggestion), and then maybe Iíll figure out how to channel this experience into something productive.
If thereís one piece of wisdom that this simple pilgrim would like to impart upon you: have the courage to start with the customer. My biggest regrets are the moments that I let a lack of data override my intuition on whatís best for our customers. This leadership change gives you some breathing room to break bad habits and deliver sustainable customer happiness - donít waste the opportunity!
I will miss you terribly.
Love,
Andrew
Source http://news.ycombinator.com/item?id=5301146

Refreshing for a change. Got to give him full credit.
Title: Re: GRPN - Groupon
Post by: premfan on February 28, 2013, 07:19:52 PM
 I feel this was a PR move due to the street absolutely hating the guy. I mean the guy started a business from 0-2.2 billion in revenue in 4 years and he gets the boot. That doesnt seem right to me.  The board gave in to the pressure of meeting the streets expectations and felt it needed a "public makeover". Groupon is in growth mode and it needs to balance growth with profitability. Which they were on the path to due to automation of the deal marketplace headed by mr.raman.  The board jumped the gun on this and it makes me question there focus on creating a unique platform. Companies like this need a long term focus and mindset. Firing andrew shows how short sighted this board is.  Pretty brutal when you start a company from bascially scratch to 2.2 billion and get the boot.
Title: Re: GRPN - Groupon
Post by: stahleyp on February 28, 2013, 07:24:27 PM
Oh man, this line was great, too.

"If Groupon was Battletoads, it would be like I made it all the way to the Terra Tubes without dying on my first ever play through"  ;D

I never did beat that game.  :'(
Title: Re: GRPN - Groupon
Post by: DCG on March 01, 2013, 04:19:15 AM
I don't think firing him was a good idea.
Title: Re: GRPN - Groupon
Post by: DCG on March 01, 2013, 04:20:12 AM
I feel this was a PR move due to the street absolutely hating the guy. I mean the guy started a business from 0-2.2 billion in revenue in 4 years and he gets the boot. That doesnt seem right to me.  The board gave in to the pressure of meeting the streets expectations and felt it needed a "public makeover". Groupon is in growth mode and it needs to balance growth with profitability. Which they were on the path to due to automation of the deal marketplace headed by mr.raman.  The board jumped the gun on this and it makes me question there focus on creating a unique platform. Companies like this need a long term focus and mindset. Firing andrew shows how short sighted this board is.  Pretty brutal when you start a company from bascially scratch to 2.2 billion and get the boot.

Exactly.
Title: Re: GRPN - Groupon
Post by: Palantir on March 01, 2013, 07:29:22 AM
Yeah, this is really disappointing. I understand the concern over making a loss. But by the CF statement, they made 200M in FCFE, while holding ZERO debt. I don't think they were doing that badly at all. Or am I totally off here?
Title: Re: GRPN - Groupon
Post by: premfan on March 01, 2013, 09:05:00 AM
At this stage of groupons evolution the business is fine. The concerns are there are two main businesses that are polar opposites in operating margins. The e-commerce business is high fixed cost and a low margin business. The trade off its much easier to scale. The deal marketplace is a high margin business that needs a lot of support people running the merchant accounts.  Mr. Kaman was hired to essentially automate the deal marketplace. The problem is groupon hired to many employees too fast. My speculation is that Andrew has a bond and loyalty to his employees. The rife could have been that lay offs are going to happen cause they don't need as many people to run the deal side of the business. They need to balance the SG& A to achieve profitability.  Basically they need to lay off a ton of people in the deal side of the business to achieve profitability. No reason to have thousands of employees if the marketplace will be automated. The days of cold calling are over.

You always have to see what motivates people. Andrew started the point as a social activist site to start campaigns against social causes. The dude isn't motivated by money. He is motivated by changing the world. Eric L. is a billionaire only cause of Andrews idea and most importantly his execution. Ideas are a dime a dozen. Execution is what importantly matters. He was unfairly targeted as the problem due to wall streets absurd expectations of a start up company in a new space.  I'm hoping this was just a PR move and Andrew is still involved with the evolution of groupon in the backround outside of the eyes of wall street.
Title: Re: GRPN - Groupon
Post by: Hielko on March 01, 2013, 03:28:11 PM
http://finance.yahoo.com/news/andrew-masons-378-36-retirement-190743504.html
Quote
Adding to the surreal but oddly refreshing departure of Groupon (GRPN) CEO Andrew Mason, it now appears that Mason's retirement package is minimal. As in $378.36. Not $378 million, or $370,000, but $378 - not nearly enough to even buy the proverbial gold watch (unless he shops on Canal Street).
I start to like the guy!
Title: Re: GRPN - Groupon
Post by: hellsten on March 02, 2013, 01:53:47 PM
http://www.newyorker.com/online/blogs/newsdesk/2013/03/groupons-bad-deal.html

Quote
But even a truncated list of the companyís failures borders on breathtaking: when it raised just over a billion dollars in funding over the course of 2010 and 2011, nearly nine hundred and fifty million found its way into the coffers of Groupon executives and stockholders rather than being used to fund the company.

Quote
And while the tech press, particularly publications that focus on tech startups and Silicon Valley, is essentially enthusiasticówhen Instagram was acquired by Facebook, the most well-read chronicler of Silicon Valley, TechCrunch, altered its logo in homageóit also seems unlikely that Lefkofsky will be able to provide the kind of cushioning that Masonís almost bubbly public personality did. The end of Masonís letter to Groupon employees says that ďthis leadership change gives you some breathing room,Ē but the company may have in fact lost its best source of air.
Title: Re: GRPN - Groupon
Post by: Palantir on March 04, 2013, 07:16:15 AM
Interesting insight.

Goodbye Groupon: Andrew Mason's dance with the devil

http://www.theverge.com/2013/3/1/4043566/andrew-masons-deal-with-the-devil (http://www.theverge.com/2013/3/1/4043566/andrew-masons-deal-with-the-devil)

Quote
In the wake of Andrew Mason's firing as CEO of Groupon, there's been a lot of negativity towards the young entrepreneur. In part it's because Mason was always a character, someone who largely refused to take things seriously, and who preferred to defuse tension with humor, as he did in his hilarious resignation letter yesterday. This was charming at first, then increasingly less so as Groupon's financial health, business practices and accounting came into question. But as the smiling face of the fastest-growing company in history, Mason was also a shield, a barrier between the press and Eric Lefkofsky, the co-founder and investor behind Groupon, and a man with a track record of creating hypergrowth companies that have crashed and burned... after he cashed out.
Title: Re: GRPN - Groupon
Post by: jrallen81 on May 07, 2014, 09:30:31 AM
Any thoughts on potential value following today's schellacking? Does anyone follow this closely anymore?
Title: Re: GRPN - Groupon
Post by: DCG on May 07, 2014, 09:41:02 AM
I stupidly bought some Groupon options heading into their last earnings and got creamed and lost 100%. I was a nice reminder why I shouldn't make short-term trades.


I think the Daily Deals business model is largely doomed, and Groupon's 'trying 50 other things and hope something sticks' model hasn't worked out well so far. They should've accepted Google's stupid $6 billion offer a few years ago.


There is pretty much no barrier of entry for this business.
Title: Re: GRPN - Groupon
Post by: PatientCheetah on May 07, 2014, 10:01:58 AM
Any thoughts on potential value following today's schellacking? Does anyone follow this closely anymore?

GRPN is in a multi quarters transition. I don't think their operating trends have bottomed out yet, hence the low in the stocks is still 1-2 quarters away. We could see the all time low again. Once GRPN stabilizes, I don't think it's business model is that different from QVC's and much more viable than ZNGA's. It's closest rival, LivingSocial, is losing market share fast. It could crave out a profitable niche for itself. I am waiting for the first positive surprise before buying shares.
Title: Re: GRPN - Groupon
Post by: tombgrt on May 07, 2014, 10:54:11 AM
Groupon is a nice precedent to what will ultimately come in terms of stock declines to all those momentum stocks with little to no competitive advantages. Expect 90% drops from the peaks to lows to be the rule instead of the exception. I have a hard time seeing long lasting moats in companies like CRM or FB, let alone Groupon! Einhorn is right in pointing out that network effect is the only major competitive advantage that tech companies generally have (or lack), aside from a few expections maybe. He also pointed out that a bursting bubble will show great sell offs and strong rallies so be ready to handle some volatility no matter what side you are on.
Title: Re: GRPN - Groupon
Post by: PatientCheetah on May 07, 2014, 11:14:37 AM
Fair enough with all the other names but please don't group FB together with them. FB is in same the league as AMZN and GOOG. Its earning power and pricing power are already evident. Expensive, yes, fad, hell no!
Title: Re: GRPN - Groupon
Post by: tombgrt on May 07, 2014, 11:20:14 AM
I'm saying I have a hard time finding a moat that will last a decade or longer. I'm not sure it's popularity won't fade. Agree that they are doing a great job monetizing and growing. That didn't mean I put it in the same league, should have been more clear sorry!
Title: Re: GRPN - Groupon
Post by: Liberty on May 07, 2014, 11:28:56 AM
Once GRPN stabilizes, I don't think it's business model is that different from QVC's and much more viable than ZNGA's.

I don't really see the similarities between groupon and QVC, apart from the fact that both are selling stuff without brick & mortar stores. Everything that makes QVC a good business with a moat and industry-leading margins is absent in Groupon, IMO.
Title: Re: GRPN - Groupon
Post by: PatientCheetah on May 07, 2014, 11:37:32 AM
I don't know how old are you. But for people that are under 30s, they probably have their entire lives documented on FB, most of their photos, memories of friends, etc. It would be herculean task to move all of these memories to somewhere else. Since its free to use, they have very little incentive to move even if a competitor comes out with something better. One such notable failure is Google plus. All of this information that Facebook has is incredibly valuable to marketers, probably much more granular compare to what Google has. That's why FB can charge a million a day for ads and it has been raising prices. Similar to Google, FB will use its ever increasing cash flow and expensive stocks to make its moat stronger each year. Mark Zuckerberg is a student of Gates/Jobs/Page and he understands technology and monopoly. I have high conviction that he has enough vision to defend and increase FB's moat.   
Title: Re: GRPN - Groupon
Post by: PatientCheetah on May 07, 2014, 11:45:38 AM
Once GRPN stabilizes, I don't think it's business model is that different from QVC's and much more viable than ZNGA's.

I don't really see the similarities between groupon and QVC, apart from the fact that both are selling stuff without brick & mortar stores. Everything that makes QVC a good business with a moat and industry-leading margins is absent in Groupon, IMO.

I like to hear both sides. Can you list what QVC has that GRPN lacks? I could be wrong but I think both has entered our cultural lexicons. Local group buying is synonymous with Groupon. The addressable market may not be as large as QVC's due to the finite supply of local deals. I think GRPN gets this and it is working hard to automate its processes and expanding into other related niches.
Title: Re: GRPN - Groupon
Post by: tombgrt on May 07, 2014, 11:50:46 AM
I don't know how old are you. But for people that are under 30s, they probably have their entire lives documented on FB, most of their photos, memories of friends, etc. It would be herculean task to move all of these memories to somewhere else. Since its free to use, they have very little incentive to move even if a competitor comes out with something better. One such notable failure is Google plus. All of this information that Facebook has is incredibly valuable to marketers, probably much more granular compare to what Google has. That's why FB can charge a million a day for ads and it has been raising prices. Similar to Google, FB will use its ever increasing cash flow and expensive stocks to make its moat stronger each year. Mark Zuckerberg is a student of Gates/Jobs/Page and he understands technology and monopoly. I have high conviction that he has enough vision to defend and increase FB's moat.   

I wouldn't mind seeing him succeed, it would be a great story of success. I should also add that I'm biased: I'm 24 and have never had a FB profile. Most of the pro's listed by people about FB are the exact reasons that I steer away.
Title: Re: GRPN - Groupon
Post by: PatientCheetah on May 07, 2014, 11:55:45 AM
I don't know how old are you. But for people that are under 30s, they probably have their entire lives documented on FB, most of their photos, memories of friends, etc. It would be herculean task to move all of these memories to somewhere else. Since its free to use, they have very little incentive to move even if a competitor comes out with something better. One such notable failure is Google plus. All of this information that Facebook has is incredibly valuable to marketers, probably much more granular compare to what Google has. That's why FB can charge a million a day for ads and it has been raising prices. Similar to Google, FB will use its ever increasing cash flow and expensive stocks to make its moat stronger each year. Mark Zuckerberg is a student of Gates/Jobs/Page and he understands technology and monopoly. I have high conviction that he has enough vision to defend and increase FB's moat.   

I wouldn't mind seeing him succeed, it would be a great story of success. I should also add that I'm biased: I'm 24 and have never had a FB profile. Most of the pro's listed by people about FB are the exact reasons that I steer away.

I guess its a cultural thing. If you went to an American college, everyone that you know would be on FB. Some of the highest rated television shows in the U.S. are reality TV shows. American and its close cultural counterparts love learning about frivolous details of other people's lives. FB provides such service.
Title: Re: GRPN - Groupon
Post by: tombgrt on May 07, 2014, 11:58:52 AM
Where the hell do you think Belgium is situated? :D J/k, it's pretty much the same here. I just choose not to participate. :)
Title: Re: GRPN - Groupon
Post by: Liberty on May 07, 2014, 12:09:01 PM
I like to hear both sides. Can you list what QVC has that GRPN lacks? I could be wrong but I think both has entered our cultural lexicons. Local group buying is synonymous with Groupon. The addressable market may not be as large as QVC's due to the finite supply of local deals. I think GRPN gets this and it is working hard to automate its processes and expanding into other related niches.

This post contains a decent primer on what makes QVC a good business:

http://oraclefromomaha.wordpress.com/2013/10/08/92/

(and it'll be even better when they merge with HSN; LINTA already owns 40% of HSN and controls it, but HSN sells at a much higher multiple than QVC despite being a worse operation (lower margins, no international growth), that's because QVC is hidden inside the LINTA mothership -- that's what the new tracker is doing, and once QVC trades at a more normal multiple, I expect them to merge and have even better economics).
Title: Re: GRPN - Groupon
Post by: given2invest on December 06, 2018, 09:55:06 AM
I think GRPN is really interesting around $3.  Anyone else? 

Pretty good video at bottom of this link shows the bull story.   Also go read the latest quarterly letter to shareholders.

https://www.cnbc.com/2018/12/03/groupon-ceo-on-amc-partnership-transforming-platform-into-a-utility.html
Title: Re: GRPN - Groupon
Post by: heth247 on December 06, 2018, 07:44:18 PM
I think GRPN is really interesting around $3.  Anyone else? 

Pretty good video at bottom of this link shows the bull story.   Also go read the latest quarterly letter to shareholders.

https://www.cnbc.com/2018/12/03/groupon-ceo-on-amc-partnership-transforming-platform-into-a-utility.html

Question is, when will their top line stabilizes, it keeps declining (although it is intended). Will "Groupon+" really be the silver bullet?
Title: Re: GRPN - Groupon
Post by: Lakesider on December 07, 2018, 01:23:21 AM
I used to use the occasional groupon a few years back... but fuck me did they become the most annoying company. Emails every day from 4 different groupons. Groupon goods, groupon restaurants, group on services...

The deals dont seem so good anymore, mostly they are trying to push tatty impulse purchases. If others like me they cut off all ties and never looked at it again.
Title: Re: GRPN - Groupon
Post by: Jurgis on December 07, 2018, 06:51:56 AM
I used to use the occasional groupon a few years back... but fuck me did they become the most annoying company. Emails every day from 4 different groupons. Groupon goods, groupon restaurants, group on services...

The deals dont seem so good anymore, mostly they are trying to push tatty impulse purchases. If others like me they cut off all ties and never looked at it again.

Anecdotally, I haven't used Groupon for years. I'm not on any of their email lists anymore.

But even when I used it, it was mostly random purchases that I would not have made otherwise. Not that I complain. E.g. we went to see a hawk show ( http://newenglandfalconry.com/ ) that was fun. Some of the restaurant groupons were OKish.

Now that I think about it, it might be fun to look at it again. Though I'm just too busy to wade through the email flow.  ::)
Title: Re: GRPN - Groupon
Post by: Sportgamma on December 07, 2018, 07:18:22 AM
Surprisingly, they are still getting about 65 million visits to their site monthly.
Title: Re: GRPN - Groupon
Post by: heth247 on December 07, 2018, 08:39:49 AM
Surprisingly, they are still getting about 65 million visits to their site monthly.

Have you checked out their mobile app?  It is doing pretty well. 70% traffic is from mobile.
Title: Re: GRPN - Groupon
Post by: given2invest on December 07, 2018, 10:24:41 AM
The replies are exactly why I think it's interesting.  I'm shocked 10 years after the "fad" it's still this huge business which is now majority mobile and only 20% the "old groupon". 

Look at the numbers...it's not at all expensive and when they finish the transformation you could argue it should command a very high multiple.  It's most certainly not a melting ice cube anymore.   The board is well incentivized and they are sellers at the right price.

https://www.recode.net/2018/7/7/17532138/groupon-acquisition-buyer-sale

Stock was near $5 when this article came out.  The business has not deteriorated 40% since then.  For the most part, they have hit numbers.  Just messy as they cut out unprofitable business.

It's also probably great for positioning for a recession. 
Title: Re: GRPN - Groupon
Post by: heth247 on December 07, 2018, 10:45:17 AM
The replies are exactly why I think it's interesting.  I'm shocked 10 years after the "fad" it's still this huge business which is now majority mobile and only 20% the "old groupon". 

Look at the numbers...it's not at all expensive and when they finish the transformation you could argue it should command a very high multiple.  It's most certainly not a melting ice cube anymore.   The board is well incentivized and they are sellers at the right price.

https://www.recode.net/2018/7/7/17532138/groupon-acquisition-buyer-sale

Stock was near $5 when this article came out.  The business has not deteriorated 40% since then.  For the most part, they have hit numbers.  Just messy as they cut out unprofitable business.

It's also probably great for positioning for a recession.

The problem is they are not doing a turnaround, but a transformation, which is supposed to replace their high-margin but obsolete voucher-based business model with low-margin but more frequent buyer-based business model. I think Market is not sure if this will be successful and how long it will takes.
Title: Re: GRPN - Groupon
Post by: given2invest on December 07, 2018, 11:05:40 AM
The replies are exactly why I think it's interesting.  I'm shocked 10 years after the "fad" it's still this huge business which is now majority mobile and only 20% the "old groupon". 

Look at the numbers...it's not at all expensive and when they finish the transformation you could argue it should command a very high multiple.  It's most certainly not a melting ice cube anymore.   The board is well incentivized and they are sellers at the right price.

https://www.recode.net/2018/7/7/17532138/groupon-acquisition-buyer-sale

Stock was near $5 when this article came out.  The business has not deteriorated 40% since then.  For the most part, they have hit numbers.  Just messy as they cut out unprofitable business.

It's also probably great for positioning for a recession.

The problem is they are not doing a turnaround, but a transformation, which is supposed to replace their high-margin but obsolete voucher-based business model with low-margin but more frequent buyer-based business model. I think Market is not sure if this will be successful and how long it will takes.

It's in it's 3rd or 4th year though (the transformation).   Less than 20% is now the voucher business.  Majority of biz is mobile.  The bottom line #s are getting BETTER not worse.  People too focused on top line and quarterly results.  There are huge synergies to a strategic buyer too.  I think your margin of safety is very very big at $3.

I think growth/tech people hate it cause no top line and value guys hate it cause ex stock based comp it's not "cheap".  So it lingers.
Title: Re: GRPN - Groupon
Post by: heth247 on December 07, 2018, 11:21:17 AM
It's in it's 3rd or 4th year though (the transformation).   Less than 20% is now the voucher business.  Majority of biz is mobile.  The bottom line #s are getting BETTER not worse.  People too focused on top line and quarterly results.  There are huge synergies to a strategic buyer too.  I think your margin of safety is very very big at $3.

I think growth/tech people hate it cause no top line and value guys hate it cause ex stock based comp it's not "cheap".  So it lingers.

What do you mean by "20% is voucher business"?  I thought 20% is meant for email-based. The majority of their "local" gross profit is still based on voucher (whether you show it on your phone or print it out). That is why they want to come up with G+ to get rid of the voucher.  In my area, only 4 offers are available for G+, which is voucherless. All others voucher-based.
Title: Re: GRPN - Groupon
Post by: given2invest on December 07, 2018, 12:56:50 PM
It's in it's 3rd or 4th year though (the transformation).   Less than 20% is now the voucher business.  Majority of biz is mobile.  The bottom line #s are getting BETTER not worse.  People too focused on top line and quarterly results.  There are huge synergies to a strategic buyer too.  I think your margin of safety is very very big at $3.

I think growth/tech people hate it cause no top line and value guys hate it cause ex stock based comp it's not "cheap".  So it lingers.

What do you mean by "20% is voucher business"?  I thought 20% is meant for email-based. The majority of their "local" gross profit is still based on voucher (whether you show it on your phone or print it out). That is why they want to come up with G+ to get rid of the voucher.  In my area, only 4 offers are available for G+, which is voucherless. All others voucher-based.

Yah I meant email.  My main point is Groupon peaked many many years ago and has been known as a joke for many many years yet the #s are very robust.  This isn't the yellow pages.   And the yellow pages had no new biz plan.
Title: Re: GRPN - Groupon
Post by: heth247 on December 07, 2018, 04:34:00 PM
It's in it's 3rd or 4th year though (the transformation).   Less than 20% is now the voucher business.  Majority of biz is mobile.  The bottom line #s are getting BETTER not worse.  People too focused on top line and quarterly results.  There are huge synergies to a strategic buyer too.  I think your margin of safety is very very big at $3.

I think growth/tech people hate it cause no top line and value guys hate it cause ex stock based comp it's not "cheap".  So it lingers.

What do you mean by "20% is voucher business"?  I thought 20% is meant for email-based. The majority of their "local" gross profit is still based on voucher (whether you show it on your phone or print it out). That is why they want to come up with G+ to get rid of the voucher.  In my area, only 4 offers are available for G+, which is voucherless. All others voucher-based.

Yah I meant email.  My main point is Groupon peaked many many years ago and has been known as a joke for many many years yet the #s are very robust.  This isn't the yellow pages.   And the yellow pages had no new biz plan.

My understanding is that from 2015-2017, they are in "turnaround" mode, cutting the excess fat and shrink to profitability. But starting from 2018, they are in "transformation" mode, trying to change their business model from voucher-based flash deal to a "utility" that is used more frequently by people. Whether that will be successful remains to be seen.
Title: Re: GRPN - Groupon
Post by: Sportgamma on December 09, 2018, 06:02:37 AM
I haven't been following Groupon at all and haven't looked at the fundamentals in detail. However, a short glance at the numbers does pique my interest.

I find it interesting that Walmart has been buying rather disparate online assets recently and it would not surprise me if other conventional retailers will follow suit to a larger degree.

Time to dig in, I guess.

Title: Re: GRPN - Groupon
Post by: given2invest on December 09, 2018, 07:48:19 AM
I'd start with the last shareholder letter (which is actually the first one ever written) and go from there.
Title: Re: GRPN - Groupon
Post by: heth247 on December 09, 2018, 11:05:32 AM
I'd start with the last shareholder letter (which is actually the first one ever written) and go from there.

Given2invest, couple of questions for you:
1. When you say the margin of safety at $3 is very big, can you quantify it?
2. What do you think the catalyst is and how long will it take? If it is a buyout, will somebody buy a business in the middle of transformation?

thanks.
Title: Re: GRPN - Groupon
Post by: Sportgamma on December 10, 2018, 12:09:46 PM
I'd start with the last shareholder letter (which is actually the first one ever written) and go from there.

The letter was ok, I found. Focus on operational metrics but vague on the financials. Perhaps it is just that a certain Edward kind of ruined the word transformation for me.

That being said, the strategy outlined in the letter makes sense. Owning the relationship with the customer should be much more valuable than the legacy business. It all comes down to execution though and I assume that sounds very scary to many investors.

Take a look at this offer for example: https://www.groupon.com/deals/ga-fleetway-travel-rome-amalfi-7

I'm not sure if I should see this as a negative or a positive. Perhaps the fact that they are screwing up the 101 stuff of eCommerce means that they have a lot of runway left to extract gains out of the transformation?
Title: Re: GRPN - Groupon
Post by: given2invest on December 11, 2018, 09:59:10 AM
I'd start with the last shareholder letter (which is actually the first one ever written) and go from there.

Given2invest, couple of questions for you:
1. When you say the margin of safety at $3 is very big, can you quantify it?
2. What do you think the catalyst is and how long will it take? If it is a buyout, will somebody buy a business in the middle of transformation?

thanks.

1)  It's not expensive.  You can see what the FCF guidance is for this year and the EV.  Note there will be a nice influx of working capital on year end balance sheet.  I think the safety is there because the #s have not been bleeding the last few years as the core biz/email biz has obviously fallen off a cliff.  The numbers and page views don't seem like a biz that's about to implode.  It's just stagnant with a "free option" on them transforming the biz.

2)  Catalyst is either a PE buyout (this fits perfectly with PE...can put a little leverage on it, take it out of public eye for 3-4 years, then bring public again or sell to strategic) or just sell to strategic.   I mean they were looking to sell company when it was trading at $5 last summer.  It's now $3.  There is net cash.  The other catalyst would be people see the transformation working and put a huge multiple on "newco". 

I also think this biz works better in a recession than most.  Both businesses would need them more and consumers would gravitate towards it.