Don’t you just love it when you, as consumers, investors and analysts are told you’re stupid? That’s what new Groupon (GRPN) CEO Rich Williams did on Thursday, not literally, but effectively, via his blog page at Groupon.com.
Specifically, Williams said:
“Groupon is a misunderstood company. We’re misunderstood by analysts. We’re misunderstood by media. We’re misunderstood by consumers – both those who haven’t visited our site in awhile and those who’ve never purchased from us.”
Granted, he never used the word “stupid,” and technically, he never even took a direct shot at anyone who’s been handicapping GRPN at any point in time since it went public in late-2011.
On the other hand, the verbiage he used is CEO-speak roughly translating into “it’s anybody’s fault but our own that Groupon stock is trading at almost record lows.” And, though apologetically, Williams broadly accused at least one of the aforementioned groups as being “lazy” in reference to the perception that Groupon isn’t growing.
Respectfully to Williams, please shut up — your defensive whininess this soon in the game exposes your ego and your inexperience at the helm of a publicly traded company. With tens of thousands of owners of GRPN stock out there (with some of them sitting on huge stakes), there are more than enough interested parties that understand exactly what your company is, what it’s doing and what it’s doing wrong.
They’re not keeping it a secret either.
Giving credit where it’s due, I’m reminded of something I once heard Bill Parcells respond with to someone claiming a football team was better than its record would suggest: “You are what your record says you are.” Meaning a team with an 8 and 8 record is nothing more than a mediocre team.
In that same vein, Groupon is what its record says it is — a company that has averaged less than 10% revenue growth in each of the last three quarters (missing analyst estimates all three times) on a forex-adjusted basis, and a company that has seen revenue fall in each of the past three quarters when stripping out the effects of the strong U.S. dollar.
In his defense, there’s a kernel of truth buried in the message Williams posted on Thursday. That is, customers may not fully understand what it is that Groupon is now, now that it’s no longer just a daily-deals site. The follow-up question is, who’s fault is that? It’s not the customer’s job to track you down and look for a reason to purchase from you. It’s your job to figure out how to get the customer’s attention and make them want to buy from you.
That’s clearly something you haven’t done.
Williams may want to at least acknowledge the possibility that customers do understand what Groupon is, and just don’t care.
With that as the backdrop, that fact that Groupon’s growth has stagnated and it’s still not mastered the core art of “local” may in fact be a sign that there’s no market there.
As Williams explained:
“There are a number of big companies – Amazon, Facebook, Google – who’ve tried and died in local. Local is a hard business. As the unquestioned leader at this point, we know that better than anyone. On more than one occasion, we’ve been overly enthusiastic about the potential impact of new products, and we’ve been wrong more than once with how critical it is for us to compete in certain areas. We shouldn’t run from those failures or apologize for them.”
Did it ever occur to you, though, that if Facebook, Alphabet (while it was still under the Google umbrella) and Amazon — all very smart and well-funded companies — each failed to make a viable business out of localized advertising, then maybe there’s a bigger, insurmountable reason you’ve also failed to make it work?
I’m just sayin’.
In fact, I’ll even pinpoint where I think the flaw in the philosophy is.
Williams closed his blog post with:
“I believe strongly that a better Groupon matters. It matters because local matters; neighborhoods matter. Part of what makes neighborhoods special are the businesses that line their streets and create hubs, energy and connections for communities. Groupon gives those businesses tools to grow and thrive. When local businesses thrive, neighborhoods win.”
Your “if-then” logic is on target, and I understand it’s this logic driving you to push ahead with local and scale-back on sales of things like electronics.
The flaw, though, is in the assumption that your platform is the best way for neighborhood business owners to drum up business. It isn’t. If there was a truly great way to promote a local business online, Facebook would be it, and Yelp (YELP) would be a close second. The former always has an active community checking in, and the latter has established a name for itself as the go-to place to learn more about nearby shops and restaurants. Groupon has done neither.
I suspect, however, that the real tricks to success in drawing a neighborhood crowd are non-digital-promotion efforts, which completely leaves you out of the mix; as it did for Amazon and Google, and to a lesser extent, Facebook.
Bottom Line for GRPN
Getting back on point, while I do think there’s some sort of viable business model buried in the pile of rubble that Groupon is right now, that doesn’t make GRPN stock investment-worthy in the least.
That’s not Rich Williams’ fault, mind you. Though he’s been with the company for four years, he’s only been in charge of that pile of rubble for a couple of weeks. But, for him to say this early on that analysts and investors misunderstand where Groupon is as a company is not only rude, but bordering on deluded.
You are what your record says you are, and right now, the record says Groupon is a train wreck. The market is never wrong about a stock’s current price.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.