The first chapter
Few companies have grown from an idea to a nearly $17 billion company as swiftly as Groupon, the daily deals website. Frank Sennett’s new book, “Groupon’s Biggest Deal Ever,” gives a blow-by-blow account of the startup’s rapid ascent, including its founder’s audacious rejection of a $6 billion takeover bid by Google two years ago. What Sennett’s book fails to deliver, however, is an insight into how Groupon can sustain its position.
To investors today, of course, that’s the fundamental question. Since its debut in November, the stock has plummeted, trading this week below the valuation Google put on the company a few years earlier. While Sennett does not explain how durable the firm Andrew Mason built may be, he does effectively draw first-hand accounts of the inner workings of the firm and its executives.
In its earlier days, Groupon’s harshest critic appears to have been the CEO himself. He chose to display his Forbes cover bearing his picture with the headline “The Next Web Phenom” at the very entrance of Groupon headquarters in Chicago. But what looks a pretty arrogant move, upon closer inspection, is one of self-effacement. The cover is surrounded by other magazines lauding other doomed tech startups that came and went before Groupon, including Netscape, Napster and MySpace. This wall of shame served as a stark reminder to employees of how quickly the tide can turn for even the most brilliant of ideas.
Measured solely by monetary gain, Groupon was an unbelievable success, as Sennett dutifully calculates. It was the quickest firm to achieve $1 billion in sales and the second quickest (behind Yahoo) to gain a $1 billion valuation. And the company itself grew exponentially from catering to merchants and customers in Chicago to being active in 46 countries accounting for 90 percent of the world’s GDP. Its headcount went from two hundred to 9,000 in three years.
Groupon faced massive scrutiny leading up to its November 2011 IPO, including a Securities and Exchange Commission investigation into both the company’s books and CEO Andrew Mason’s notoriously frank communication, which included company emails that used humor to deflect media skepticism. In one such email that piqued the SEC, Mason urges his staff to prepare to birth an IPO baby – a breed for which there are no epidurals.
Mason’s quirks aside, Sennett argues throughout the book that the founder is a genius with a business sense so astute he alone led Groupon to greatness through a singular vision and dogged work ethic. Despite Mason’s “aww shucks” interview demeanor and self-deprecating jokes, Sennett describes his moves throughout the process of taking the company public and fending off billion-dollar offers as calculated and measured. In this respect, the book is more a hagiography than a company profile.
While Sennett, who is a Chicago native and editor of Time Out Chicago, has an obvious soft spot for the Chicago-based business and its chief, he can muster some skepticism. For instance, he notes the staying power of the company depends on maintaining strong, long-term relationships with local merchants and customers. He also highlights the challenge the company faces in forging a customer base largely drawn from local merchants.
Beyond Groupon’s ability to expand into such diverse categories as travel while continuing to acquire potential rivals, the company’s fate really depends on future consumer preferences. At the moment, the $6 billion rejection of Google looks to have been a mistake. If Sennett’s optimism for his subject is not misplaced, investors today could look at Groupon shares as something of, well, a coupon.