While this information tracks with what we’ve heard elsewhere about the company, keep in mind this is scuttlebutt from one source and nothing more.
Our source tells us…
- Groupon is not profitable internationally. Groupon is very profitable in the US, but its international operations still lose money.
- Groupon’s deal quality is going down because the founders of its European arm have an earnout. In the US, Groupon says it believes in the “one deal a day” model but in France it’s more like four deals a day. Groupon’s European operations come from CityDeal, the leading European daily deals site, which they acquired to buy a presence in Europe. CityDeal was founded by among others the Samwer Brothers, German serial entrepreneurs who are famous for copying US startups in Europe (they also founded StudiVZ, a German Facebook clone). We’re being told the acquisition included a big earnout and that the founders are shoveling as many deals as they can into Groupon so they can meet the targets for the earnout.
- Groupon signs up merchants on two-year exclusivity deals, but the merchants break them. We hadn’t heard this and we don’t know if it’s the case in the US, but apparently in Europe or at least in France whenever Groupon signs up a merchant, the deal includes a two year exclusivity clause, which seems egregious considering that not even the coupons you buy last for two years. But merchants break those deals anyway and buy deals from Groupon competitors, because they realise that Groupon suing a small business over an exclusivity clause would be a PR nightmare. As Groupon prepares for an acquisition or IPO in a business with such small barriers to entry, we imagine they will want to tout these exclusivity deals as a competitive advantage, but in reality they don’t seem to matter much.