Issue of the week: The rise and fall of Groupon

last updated 8 January 2015

“It would be exhausting to fully catalog the missteps of Groupon,” said Matt Buchanan in NewYorker.com. But the daily deals site finally sought to get back on track last week by firing its co-founder and CEO, 32-year-old Andrew Mason. Under Mason’s reign since it launched in 2008, the company experienced a meteoric rise followed by a no less dramatic fall. And no wonder. “Even a truncated list of the company’s failures borders on breathtaking”: goosed sales estimates, a lack of internal controls, and, as an inexorable consequence, a collapse of the share price. Everyone should have seen this coming, said John Shinal in USA Today. Groupon’s business model “amounted to little more than electronic junk mail.” The company raised more than $1 billion in funding in early 2011, but almost $950 million of that went to company executives and shareholders who cashed out quickly. Sure, Groupon wasn’t the only Internet company to be treated like an ATM by its executives, “yet no other company was doing so while also piling up as much red ink.”

“Let’s get one thing straight,” said Jeff Bercovici in Forbes.com. Mason would still have a job today if Groupon weren’t “taking one body blow after another from a Wall Street disappointed with its results and skeptical of its promise.” But he’s probably the biggest reason for the market’s grave doubts. Time and again, Mason “made headlines not for his sure-handed stewardship of Groupon but for acting like he’d rather be writing for Saturday Night Live.” Once, he quipped in front of a Wall Street Journal reporter that he’d been drunk at an all-hands company meeting. In 2011, he had to apologize for a Groupon Super Bowl ad that offended Tibet. And when SEC regulators were probing the company’s internal controls, Mason published a profanity-laden memo, trashing regulators and the press. Mason’s juvenile personality may not have been the only thing that got him fired or sank Groupon, but “it sure didn’t help.” At least he saved some of his best stuff for the end: “After four and a half intense and wonderful years as CEO of Groupon, I’ve decided that I’d like to spend more time with my family,” he emailed his employees last week. “Just kidding. I was fired today. If you’re wondering why…you haven’t been paying attention.”

Okay, so good riddance, said Diane Brady in Businessweek.com. But it’s not clear that Mason’s exit will pave “the way for a revival of the online deal site.” We all know that Groupon’s problems “probably stem as much from its business model as its leadership.” Merchants just haven’t been able to trust Groupon or know what results its offers will produce. Larger retailers prefer to control their own deals, while smaller merchants often find themselves shelling out big fees to get listed on Groupon and similar sites, only to be overwhelmed by deal seekers. “And for the rest of us? There are only so many half-price Thai food offers one can stomach before Groupon emails start to look like spam.” In fact, it may be that by firing Mason, “Groupon has lost one of the most interesting things it had left.”