Groupon has been an investment darling for the last several years. And after its IPO, reality set in. But despite the recent turnaround (stock is off its lows), are there any signs of a long term, sustainable business?

1. Investment Thesis
Groupon, Inc. (GRPN)
Dr. Augustine Fou
http://linkd.in/augustinefou
January 2014
-1-
Augustine Fou

2. Executive Summary
INVESTMENT THESIS
GRPN is well off its lows, but I remain bearish on the
stock and company unless it can significantly evolve its
business model and become less dependent on cash-flow
arbitrage and “fad-dish” consumer behavior.
-2-
Augustine Fou

3. Executive Summary
Key to Groupon’s Initial Success
1. enough people needed to buy the deal before it
became real (so users tended to tell their friends via
social networks
2. there was a deadline to buy it (if you missed one,
you won’t want to miss the next)
-3-
Augustine Fou

4. Executive Summary
Key Points
• Nothing proprietary; major competitors already experimented
in the space
• Competitive landscape filled with established players e.g.
Amazon Local, Google Offers), niche dominators (e.g.
OpenTable)
• Applicable to very high margin catagories like clothing; not
feasible on big ticket items like consumer electronics (HDTVs)
or low margin retailers (like grocery stores).
• Useful in generating awareness, not viable as long term
customer retention tactic for merchants.
-4-
Augustine Fou

5. Stock Price History
-5-
Augustine Fou

6. Recent Margin History
$600M quarterly revenue
40% cost of revenue
58% SG&A
2% operating income
-6-
Augustine Fou

7. Jan 2014 Update
Visitors
16 million /mo
Visits
37 million /mo
-7-
Augustine Fou

8. Jan 2014 Update
Visits/Person
2.3 /mo
Pages/Visit
14.5 /mo
-8-
Augustine Fou

9. Competitive Landscape
Offline players
Online Local Marketing
-
-
Valassis
Advo
Valpak (local equivalents)
Walmart (experiment)
Yelp
OpenTable
Restaurant.com
Fandango mobile app
Online Coupon Players
Online sales sites
-
-
RetailMeNot
Coolsavings
Smartsource
MoneyMailer
Rue la La
LivingSocial
Google Offers
Amazon Local
Woot (Yahoo)
Payment Companies
-9-
Paypal.com
Google Wallet
Square
Intuit GoPayment
Technology competitors
-
Coupons.com
YouTechnology (Softcoin)
Augustine Fou

10. Historic Precedent
January 2001
Mercata to shut down
after burning through
nearly $100 million in
venture money on
“group buying”
service.
- 10 -
Augustine Fou

11. Dr. Augustine Fou – Digital Consigliere
“I advise clients on innovating their business
to stay ahead of trends and reduce their
reliance on single forms of revenue. I also
provide expert witness testimony regarding
technology, business model and competitive
landscape of internet-related companies.”
FORMER CHIEF DIGITAL OFFICER, HCG (OMNICOM)
MCKINSEY CONSULTANT
CLIENT SIDE / AGENCY SIDE EXPERIENCE
PROFESSOR AND COLUMNIST
ENTREPRENEUR / SMALL BUSINESS OWNER
PHD MATERIALS SCIENCE (MIT '95) AT AGE 23
ClickZ Articles: http://bit.ly/augustine-fou-clickz
Slideshares: http://bit.ly/augustine-fou-slideshares
LinkedIn: http://linkd.in/augustinefou
- 11 -
@acfou
Augustine Fou