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Groupon's fall from favor

posted 14 May 2012, 15:10 by Mpelembe   [ updated 14 May 2012, 15:11 ]

Groupon stumbles after a hot IPO. A falling stock prices, accounting issues, shareholder lawsuits and a board shake-up add to the woes for the daily deals provider.

USA-GROUPON - Daily deals provider Groupon has fallen out of favor on Wall Street, and on Main Street as the company stumbles with accounting mistakes, shareholder lawsuits and a board shake-up.

The young company, started in 2008, brings local merchants online - giving them the ability to connect with customers and gain information about their customers. But it never met up to its early hype according to Pete Fader, Professor of Marketing at Wharton, the business school at the University of Pennsylvania.


"I think people were betting on Groupon for the right reasons, I think this is an emerging sector they were right that there were particular consumer wants and needs and merchant wants and needs that weren't being met in other ways but Groupon has clearly proven itself that they can't do it, and while they have been taking some baby steps in the right direction, trying to embrace the data a little bit more trying to run it more as a business instead of as a crazy creative enterprise, I think it's too little too late for Groupon."

Groupon had shown a lot of promise, as a private company it was one of the fastest growing businesses in history. The company was valued at well over 10 billion dollars at its initial public offering in November, proving to be one of the largest internet IPO's in the past decade. The company earned 2 pennies a share in the latest quarter, doubling forecasts, and revenue topped estimates.

Still, some industry watchers think the world of daily deals is already getting crowded with formidable competitors, like Amazon.


"Amazon understands their users and their merchants really well, Facebook hasn't really proven itself adept at having that same kind of understanding of customers and merchants they could there's a lot of smart people there but what they do have is just an extraordinary footprint and that allows them to do a lot of things that companies can't. I'd say Amazon is most likely they have some core capabilities to date."

Groupon may have more trouble gaining attention on the Street as Facebook makes its expected debut on Friday as investors tap into the next hot deal.

Jill Bennett, Reuters