I had stated many months back that I really felt the Groupon numbers were over inflated. Well, they just restated to the amount of $400 Million—LESS!
For those of you not familiar with Groupon, they are a Chicago based company that provides Group Coupons around a hot new space of “daily deals”.
What Groupon (as does LivingSocial, BuyWithMe, and a host of others) really has is a glorified email list. There is nothing technological or proprietary about what they are doing.
It’s an email list of 100 Million people or so getting a coupon.
Where it gets further muddy as to the value and offering is what has come out recently in their IPO Filing (known as an S1).
Groupon was claiming over $700MM in revenue, and on pace for $1 Billion.
However, the company was claiming as revenue the “entire” amount collected for the coupon. This did not take into account the amount they had to remit back to their merchants.
Here is how it worked:
Let’s say you sell a coupon for $10 (sales)
Then, you have to pay them merchant 75% of that, which is $7.50 (remit)
That means your “revenue” is $2.50 ($10-$7.50).
Nope! Groupon was counting the entire $10 as revenue!
No way Jose!
Once this remittance was included, their revenue dropped by over $400 Million!! That is a BIG drop.
I’m not surprised, as the Groupon Group is famous for shenanigans from their past.
Groupon had a chance a short while back to see to Google for over $6 Billion. They chose to pass on that offer, and instead took in outside financing, especially in the hopes of getting an IPO valuation of $20 Billion.
However, the financing was predicated on a valuation, which in turn was predicated on the inflated revenue numbers.
Now, with the real story coming out, it throws into question their entire revenue model, cost of customer acquisition, and their prospects going forward.
To that end, I wonder if Groupon will ever get out of the IPO gate?