Based on the numbers provided. While they were doing their 'hypergrowth', they managed to improve their income/expense ratio. That's pretty impressive to me. When they stop spending so much money on growing, it should be easy to show a profit.
When they stop spending so much money on growing, it should be easy to show a profit.
I'm not convinced that this follows from what we know about the numbers. It looks like one could just as easily make a case for the numbers indicating that the moment Groupon stops spending like crazy, their revenue will drop like a rock. What if they must cold-call dozens or hundreds of businesses in order to generate a sale? What if there isn't a way to sustain that without those aggressive sales tactics and the huge staff of sales people? What if they can't keep consumer interest without spending millions on marketing? What if there is a saturation point where people are simply bored of Groupon deals? (I unsubscribed after about 4 days, but I'm not much of a coupon kinda guy, so I don't know that I'm the ideal data point.)
I'm not saying it can't be true, I'm just saying I don't see that it is obvious that the hypothesis that there is a super-profitable business (or, at least profitable enough to justify their current valuation) underneath all the growth expenses is true.
