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Sunday, September 2, 2012

Groupoff!

Are you familiar with Groupon? It sends you a daily email with deeply discounted prices from several merchants. Each offer is good for one day only. Driven by the need to act quickly, you buy the "Groupon" for the offer and are granted a fixed period of time -- usually a few months -- to use it with the merchant.

The problem is, after two full years of participation I've made just six purchases from Groupon. Only two of these purchases saved me a significant amount of money. One merchant still hasn't delivered my goods. You might say, fulfilling orders is the responsibility of the merchant not Groupon; but I suspect what pushed the merchant's order fulfillment team over the edge was having to process a large number of Groupon orders that had the same expiration date.

Two years means over 700 emails from Groupon have entered my inbox. The hit rate is less than 1%. It's not worth my time, so I have unsubscribed. The clear inference is that Groupon's business model doesn't make sense for most merchants, even on a one-shot basis.

From a business perspective, Groupon has been doing poorly. It IPO'd in November 2011, and the stock price has fallen 87% from its peak. One reason: Groupon's accounting, which has often been inaccurate. It's been a problem since the beginning.

Wall Street, of course, doesn't care about the decline of Groupon post-IPO. Morgan Stanley, Goldman Sachs, and Credit Suisse got their money from the IPO up-front -- as they did from Facebook's IPO. Friends, never forget that Wall Street is always trying to sell you something. Buying it might not be in your best interest.

I still get daily emails from Woot (now a subsidiary of Amazon), but I've begun to question those too.