Groupon, Groupon, Groupon: Everyone’s talking about the original daily deals company in the leadup to their public debut on the markets. Everyone has a theory about what their company is and isn’t; what their future can be and can’t. And Business Insider—ever so often derided for their cut-and-paste journalism—did something late last night with Groupon that they sometimes tend to do: published a sprawling, sensational, and sourced piece of reporting that covers entire swaths of narratives both primary and otherwise on a hot subject. Meet “INSIDE GROUPON: The Truth About The World’s Most Controversial Company.“
It doesn’t contain any groundbreaking revelations on the company. It’s not going to open them up to further points of scrutiny or single-handedly change the fate of Groupon’s IPO.
But it does offer some great insight from the inside and it is, admittedly, an excellent read. Here are our favorite parts:
1. Groupon as Oz. The way early Groupon is described, it sounds a little euphoric: a stratospheric rise paired with ever-increasing salaries and a metastasizing employee base that in retrospect, looks patently absurd:
“Working there was crazy,” says another early employee. “[From 2009 to 2010] we hired 10,000 people. That was completely insane — something that’s never happened before, and should never happen again. We ended up in 45 countries in 16 months. It was nuts, it was fun, it was a blast.”
2. Why Groupon Rejected The Google Offer. Groupon was offered a $5.75B buyout offer by Google they ended up leaving on the negotiating table. Google has since come up with their own daily deals scheme, Google Offers, which they’ve padded by bringing other, more experienced retail deals ventures in this field into their own fold, which they’ll be using to joust against competition like, you guessed it, Groupon. Why’d Andrew Mason and Co. walk away from all that cash? The prevalent theory was always a matter of ego. The truth, if BI’s sources are to be believed? Not so much.
In the end, Groupon rejected the Google offer too.
“There’s only one reason that didn’t happen,” says a source close to Groupon.
Groupon’s board worried that the FTC would take 9 to 18 months to review the merger, and that there was a very good chance it would kibosh the deal.
And, of course, a little bit of greed:
Says a source: “Had [Google] made a $7.5 billion deal instead of a $5.75 billion deal, I think it would have gotten done.”
3. Groupon as Boiler Room. As BI tells it, G progresses from a magic startup culture carpet ride into a place that resembles something more like Boiler Room (or, you know, a cross between an investment bank and a trading floor where everyone is sweating over money, the meaning of which is still in the macro picture fairly obtuse). But they were making money. There’s definitely that. And it wasn’t entirely pleasing to everyone, either:
“Early sales reps could definitely make six figures,” says one early employee. “Probably the ones that were the first 10 to 15, were probably making well into the six figures. A couple sales reps [were] probably making over $300,000.” These massive pay days for entry level employees pissed off some of the older executives in Groupon’s Chicago office.
4. ZE GERMANS! Last May, Groupon purchased German Groupon clone CityDeal for what’s rumored to be in the area of $100M. CityDeal was owned by the Samwer Brothers: Marc, Oliver and Alexander. Now these guys own “about 6.5% of Groupon’s shares.” When the Germans came in, quite a bit changed in Groupon’s once happy-go-lucky culture. The Germans—who are now, for all intents and purposes, running Groupon’s sales teams through the company’s head of UK operations—do not play around.
They rule it with an iron fist. With some mixture of admiration, fear, and revulsion, their way is known amongst Groupon employees as “The German Way.” “They’re very shrewd, savvy, sharp elbowed guys,” says one source. “They are extreme capitalists,” says another. “For them there is no soft and fluffy side of the business. They’re revenue driven, not people driven.” “I think a lot of us who were enchanted by Andrew’s format of a combination of people and money and customer, were kind of turned off by The German Way. I think they really changed the internal happiness for the workplace.” For one thing, “The German Way” has meant the end of absurd pay days for entry level employees doing nine to five work. It’s also meant that Groupon’s office place has become a much more intense for sales people. “It’s a total boiler room sales culture. And it’s really hardass. It’s pretty hardcore.”
Some Groupon employees think it’s ruining the working utopia that Groupon once was. Others think that it’s high time someone came in to ruin said utopia.
5. The ACSOI Numbers. ACSOI stands for “adjusted consolidated segment operating income.” If you work in tech and have never heard of it, don’t worry! If you work in finance and have never heard of it, don’t worry! Because it’s an accounting standard/metric that Groupon made up. Here’s how BI explains it:
Basically, Groupon was taking the money it was spending on advertising to acquire new subscribers to its email and not counting that money as a quarterly, recurring expense — but as a one-time, capital expense, the way Google might account for the cost of building a new server farm. Groupon was saying that ACSOI helped it figure out the ratio between the amount of money it needed to spend on marketing to acquire a subscriber and how much that subscriber would be worth to the company over the long haul.
In other words, imagine Groupon as a crack dealer. Groupon is breaking down their costs by the amount of marketing and crack rocks it would take to get someone hooked on crack, and then on the other side of the equation, making estimates based on how addicted to crack they think their new crack-smokers will be. This is how they create their financial models.
The only problem is that Groupon doesn’t sell crack. They sell Groupons.
Obviously this wouldn’t make sense to, say, the SEC. So:
In later filings with the SEC, Groupon removed references to ACSOI, but a source familiar with Groupon’s on-going accounting practices says “[Groupon] still [looks] at those metrics and measures, every week, every month, every quarter, internal. It is an important metric of how [Groupon measures] the health of the business.”
6. Andrew Mason Can’t Shut Up. The SEC has rules that state that in the leadup to an IPO, you basically can’t go crazy talking to the press and hyping your company up. Lucky for Groupon, they have an entire tech press to do that for them. Unfortunately for Groupon, that isn’t enough:
“This quiet period has been a fucking disaster,” says one source who helped build the company. He says it’s been particularly rough on Andrew Mason. “He’s having a rough year because we went through this amazing run where we were the fair-haired child for a while, which all these great internet companies get to be. We went through it all quickly. We grew quickly [and] we went through the hate period more quickly than anyone.” “I think the kid will come out of it much stronger. I think you’ll see a different Andrew that’s more serious, now that he’s been beaten [down by] the biggest shit show in the history of quiet periods.”
Not that it’s something anybody couldn’t tell, but it’s fun to hear from the inside. There’s more: biographical information about Andrew Mason, stories from the company’s early days, that kind of thing. But the most compelling thing about Nicholas Carlson’s sprawling narrative of Groupon—handily one of the best pieces of journalism about the company in recent months, and one of the best long-form narratives Business Insider has ever produced—is watching the company morph from an idealistic sales technology into a shitshow where billion-dollar valuations fluctuate day-to-day, where accountability has morphed from a bright-eyed team spirit into a cynical introspection set upon it by the cold, crass skepticism of the public, and how all these things—along with other territories impeding on its business—have changed what this company is at its core so fundamentally, and so quickly.
The revelations aren’t stark or earth-shattering, but they absolutely provide a coherent measure of aggregate insight pretty unparalleled through now. It is, without question, a hell of a read.