Posters

5 Reasons I'm Not Buying Groupon

07.02.12

Something to be said for the company's impressive revenue growth, which has ballooned from $4 million to $430 million in just two years. But there's also something sad about a company that can grow revenue by a hundredfold and is still unable to turn a profit. Although its third-quarter loss was marginal relative to the $554 million in cumulative losses over the previous three quarters, it shows that Groupon's spending habits could very easily get this company and its shareholders in trouble. With quarter-over-quarter revenue growth drastically slowing, that sends a large enough signal for me to stay away.

There's no longevity
Perhaps an even greater risk for Groupon than the 300-plus companies playing copycat is the risk that small businesses could get fed up with the current revenue-sharing model. The way things are currently set up, Groupon shares in the revenue brought in through its daily-deal offerings, while many small businesses wind up with little or no profit because of the revenue sharing or the nature of the discount being offered. There's nearly nothing that would prevent small businesses from eventually connecting directly to consumers and cutting Groupon out of the loop completely. Groupon's business model seems viable now, but I'm not so certain it will be successful five years from now.

The IPO market stinks
Don't let Friday's gain in Groupon fool you. The IPO market has been an unforgiving beast this year,

Source: Motley Fool