Groupon may have fired its founder and CEO last week as it seeks to fix its problems, but in the big scheme of things, the company is still searching to find its way in a marketplace that's becoming ever more crowded with sellers of online deals for consumers.
Just a little more than two years ago, in November 2010, Groupon was being eyed as an acquisition target by Google with rumors of a cool $6 billion purchase price. You can bet that Groupon executives today wish they had taken that deal at the time.
Instead, though, things have soured for the company, which offers discounted deals to consumers for everything from merchandise to services to restaurant specials.
Last week, Groupon's CEO, Andrew Mason, took the fall for the company's stock performance, which continues to disappoint investors and analysts. After Mason was fired, he sent a note to the company's employees, writing that he "failed at this part of the journey" and pointing out that a fresh CEO could give the company another chance, according to a March 4 story from The Associated Press. Mason founded Groupon in 2008.
One analyst, Michael Gartenberg of Gartner, told the AP that the firing had been "fairly widely expected," due to Groupon's lagging performance. "The question is whether this, as a business model, can last," Gartenberg said. "It's easy to replicate and under a lot of pressure. The question is, where the company goes from here. … Clearly something wasn't working, isn't working."
Another analyst, Daniel Kurnos of Benchmark Co., told the AP that he "questioned whether a change in leadership will be enough," though he said "a successor might get Groupon more focused and steer it toward more traditional businesses."
On a positive note, one of the company's products, Groupon Goods, which only sells products, has been performing well, AP reported. But that may not be enough.
"There was always a sense that Groupon had a lot of good ideas but no real focus," Kurnos said.
To take Mason's place, Groupon appointed Executive Chairman Eric Lefkofsky and Vice Chairman Ted Leonsis to the Office of the Chief Executive while a replacement CEO is sought.
On Feb. 13, Groupon had reported a fourth-quarter operating loss of $12.9 million and revenue of $638.3 million for the period ending Dec. 31, 2012, according to an announcement.
The quarterly results, with another round of overall losses, sent Groupon's stock prices dropping.
Groupon has more than 11,000 employees and offers more than 30,000 deals a day to more than 200 million subscribers, according to the company. Its customers purchased more than 50 million Groupons in the last quarter alone, the company said.
In a note to employees that was leaked to The Wall Street Journal, Lefkofsky and Leonsis wrote that "we all know our operational and financial performance has eroded the confidence of many of our supporters, both inside and outside of the company. Now our task at hand is to win back their support."
Groupon has many more competitors in the online deals marketplace than it had when it started in 2008. LivingSocial has also been fighting in the space, as well as many local coupon and deal companies both small and large.
When Google was eyeing Groupon in 2010, the startup was only valued at about $1 billion. But back then, Google was looking at paying a hefty premium over its worth to bring it into the Google family. Ultimately, Groupon executives rejected the deal.
Google has spent plenty of money in recent years on acquiring startups to expand its business, making more than 200 such acquisitions since its initial public offering (IPO) in 2004, including many smaller companies and larger purchases, such as the 2006 purchase of YouTube for $1.65 billion and the 2007 acquisition of DoubleClick for more than $2 billion.
Right now, Google has stashed away $48 billion in cash to give it free rein and lots of financial options in the marketplace should tantalizing acquisition targets show up in its cross hairs, according to Chief Financial Officer Patrick Pichette, who recently described its acquisition budget at a technology conference held by Morgan Stanley in San Francisco.