"Yes, the amount of money they’re spending on customer acquisition and retention is absolutely insane. (And the amount owed to merchants is especially troubling.) But look at what they’re up against. Pretty much single major player is now coming directly at them — including the company that tried to buy them for several billion and was turned down, Google."
Wouldn't a proper business model dictate just about the opposite? When trying to build a profitable customer base, you should focus on keeping customer acquisition costs DOWN, not spending 3x revenue on it. For example, Super Bowl ads just don't seem like an appropriate way to spend money for them right now.
This is nearly identical to what happened in the last dot com crash. Sure, Groupon does have significant revenues, but they haven't proved (to me anyway) that these revenues are sustainable without their massive expenditures.
We've heard numerous times that Groupon considers its sales force to be a major asset, partially justifying its valuation and forthcoming IPO. Maybe. However, unless that sales force proves to be a strategic asset to a customer-facing feature, whether it be cheaper or more interesting deals than the competition, I don't see a multi-billion dollar value there.
"Yes, the amount of money they’re spending on customer acquisition and retention is absolutely insane. (And the amount owed to merchants is especially troubling.) But look at what they’re up against. Pretty much single major player is now coming directly at them — including the company that tried to buy them for several billion and was turned down, Google."
Wouldn't a proper business model dictate just about the opposite? When trying to build a profitable customer base, you should focus on keeping customer acquisition costs DOWN, not spending 3x revenue on it. For example, Super Bowl ads just don't seem like an appropriate way to spend money for them right now.
This is nearly identical to what happened in the last dot com crash. Sure, Groupon does have significant revenues, but they haven't proved (to me anyway) that these revenues are sustainable without their massive expenditures.
We've heard numerous times that Groupon considers its sales force to be a major asset, partially justifying its valuation and forthcoming IPO. Maybe. However, unless that sales force proves to be a strategic asset to a customer-facing feature, whether it be cheaper or more interesting deals than the competition, I don't see a multi-billion dollar value there.