The Groupon Pile-On
It’s that time of year again, when the press smack around a company they were in love with only moments ago.
The most recent target: Groupon.
Why? Not because any of the company’s fundamentals actually changed, but rather because it’s cheap journalism with that magical elixir of wunderkind and controversy.
Better yet, it drives pageviews (read: revenue) for publishers. The only problem: it’s total bullshit.
The guilty? Pretty much everyone:
- In July 2011, Fortune praised Groupon’s hiring practices in a story, “Hiring Without a Net at Groupon.” How long did it take for the mag to kill the company? Less than 120 days, with “Groupon IPO is hot, but its business prospects? Not.” Fortune didn’t stop there. When the stock hiccupped, it published, “Groupon plunges below IPO price.”
- Business Week accused Groupon of “propping up” its stock with an article titled “Groupon Value Propped Up With Lowest Internet Float in Decade.” The mag also wrote that “Groupon stock slides among lukewarm ratings.” This is the same Business Week that wrote about “Groupon’s Management Secret in Two Words.”
- Fox Business named Groupon the “#1 Hottest Website of 2010,” yet right after the IPO it published “Are Groupon’s shares overvalued?”
- In August 2010, Forbes published a piece called “Meet the Fastest Growing Company Ever,” a glowing review that tripped over itself lavishing Groupon with praise. A mere 12 months later, Groupon had become a daily punching bag: On Nov. 23 hit “Beware Groupon,” the same day the mag also published “Is this Groupon’s Webvan Moment,” and “Groupon Shares Falling Apart; Off 35% in three days.” The next day brought “Groupon Shares Fall Apart,” and finally, “Easy Come, Easy Go: Groupon’s Chief No Longer a Billionaire.”
The cold reality is that Groupon was never as perfect as the early articles would have you believe, nor is it as badly broken as the current articles suggest.
Groupon is a work in progress. Its challenges are the result of a company engaged in hyper-growth so intense that processes were bound to break, and cracks in the foundation were almost guaranteed to form. That is not an indication of death, but life. Having grown up in Rochester, New York in the shadow of Kodak, I can tell you with certainty: death sounds a lot quieter.
The real question is how the company manages the next five years. Its strategists are going to have to turn the corner toward profitability in the face of intense public scrutiny, while still maintaining meteoric growth rates. It will be no small feat. At some point, growth will slow, and they will need to figure out how to manage a business where many employees will lack the financial incentive to continue working there.
I’m not sure if Groupon will find its way to profitability or grow into its multiple.
I worry about companies that rush to an IPO before their profitability is fully baked. I worry about how solid the foundation is given the torrid growth. I worry about the competitors, and the flakiness of consumers. I even worry about the macro economy.
About the only thing Groupon’s CEO shouldn’t worry about: the press.
Right after dozens of articles in late November trashed the company, the stock promptly climbed more than 50% in less than three weeks. And as I write this, Groupon is trading 10% above its IPO price.
Next time, the press should pause for a minute before they do the Groupon Pile-on.