I have gone on the record as being dubious about Groupon's business model for some time now. Indeed, in an article published in the European Financial Review, I suggested that a simple diagnostic quiz could reveal some of the weaknesses in its business proposition, including the fact that the stickiness which great business models create for companies with their customers doesn't seem to be there with Groupon. There is also mounting evidence that for many of the small businesses it targets with traffic-building promises, the concept just doesn't deliver.
But never mind me, the company went on and went public anyway. The trouble with being a public company is that it immediately puts you under glaring headlights as far as performance is concerned. So I suppose it wasn't all that surprising that a Wall Street Journal article entitled "Groupon's Growing Pains" began this way:
Groupon Inc. went public on the promise of fast growth and future profits. But on Wednesday, some of those promises remained elusive.
In its first major test since an initial public offering in November, the Chicago-based daily deals site reported revenue more than doubled to $506.5 million in the fourth quarter, strengthened by new products, holiday sales and a rise in the rate it takes from merchants.
The company has yet to prove to investors that its business of offering coupons to local business is profitable. Groupon reported a loss of $37 million in the quarter...
One quarter down - I guess we'll see how many more to go.
- Posted Rita McGrath on February 10, 2012
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