IT'S ALIVE: Groupon stock up, spreadsheets still soaked in red

Re: How do they manage to make a loss?

hardware and infrastructure costs....connectivity and bandwidth costs...website/software development and maintenance costs...systems administration costs...administration costs...fees to credit card companies...fees to specialist testers to ensure security and integrity...etc....etc...etc...

Re: How do they manage to make a loss?

"It's a parasitic model, it is tough to see how they manage to lose more money than they make."

Because the supply of businesses willing to sign up under those terms is likely to dwindle- those who get their fingers burned once are unlikely to use it again, those who aren't smart enough to learn (or are in a blinkered race to the bottom) will probably go out of business, and those who haven't tried yet will be aware of the pitfalls associated with Groupon deals by now.

Of course, there may be some cases where the business still gains more from the relationship than Groupon extract (i.e. how it *should* work). But that's likely to be a *far* lower percentage than Groupon would like us to believe.

(It's theoretically possible that a business could be wasting money on endless Groupons and still keep their head above water by doing well elsewhere; the ideal situation for a parasite. But any business competent enough to be the latter is less likely to do the former.)

Re: How do they manage to make a loss?

Sales people like their commissions

Re: How do they manage to make a loss?

I expect they make a loss because the company hyper inflated while at the same time conducting scorched earth policy that left every market they passed through a barren wasteland of "service industry" offers - car waxing, eyebrow plucking etc. All the businesses which actually sold a product either went out of business or got so badly burned as to never use Groupon again. It's only service industries which can survive in the world of coupons because they can invent some preposterous figure for their service and "discount" it and still make money because there are little material overheads.

So they have the massive infrastructure and sales teams and not enough business to sustain it. On top of that their business is hardly unique. There are probably 4 or 5 rival services in most of the markets they compete in, and perhaps some of these are more nimble, have lower overheads and are better to deal with as far as businesses are concerned.