Before Groupon went public in 2011, expectations inside and outside of the company were that it would become the next eBay.
Bankers suggested it could be a $US30 billion company.
It had one of those iconic, young tech CEOs in Andrew Mason. Mason, who would do things like mock TV interviewers with “funny” answers, infused Groupon with a zany culture.
Then Groupon went through a disaster ous lead-up to that IPO. There was an accounting scandals. A COO quit. A million Groupon clones flourished. Employees sued over working conditions. Expectations were lowered.
Still, people thought the company would go public at a $US10 billion valuation.
Today, after almost two years on the public markets, Groupon’s market cap is $US7.08 billion — and that’s after two good quarters and a recent spike in its stock price.
The reason for the stock price surge seems to be that Eric Lefkofsky, Groupon’s original financial backer, agreed to become the company’s full-time CEO.
He’d been running the company on interim basis since February with chairman Ted Leonsis, after Groupon fired Mason.
Yesterday, we spoke on the phone with Lefkofsky.
We asked him…
…How has he managed to get Groupon pointed in the right direction again?
…Is he in it for the long haul?
…What went wrong, anyway?
…Is Groupon still the zany, happy place it was under Andrew Mason?
Here’s a transcript of that conversation, lightly edited for clarity and brevity.
Business Insider: When you were here in our office a few months ago, Groupon chairman Ted Leonsis said that Groupon is going to be a $US100 billion company some day? Do you agree? How?
Eric Lefkofsky: I’m not sure Ted said it exactly that way. Ted was trying to convey the point, I believe, that we’re not focused on trying to get Groupon to be 10 or 20% bigger. When you think about the opportunity in which Groupon sits, both in the mobile commerce landscape and the local commerce landscape, it’s a multi-trillion part of our global GDP. And Ted was trying to say, you know, we’re not trying to get 10% bigger. We want it to be a huge company. I think he was using $US100 billion as an aspirational point, he wasn’t implying that in any short period of time we’re going to be larger than Amazon.
BI: What’s the plan?
EL: Right now we’ve got three big initiatives we’re working on.
We’re working on this transformation from email to mobile and we’ve made great progress there.
Our mobile business in North America now represents 50% of our business. And our international business, albeit starting at a lower base, is growing even faster in terms of mobile adoption.
That’s step one.
Step two is that for marketplace to really take off and be vibrant. We’re seeing significant lift in the number of merchants who are in our marketplace, every month over and over again.
What that allows us to do is have an experience where consumers can go in and type in Italian food or pizza or pilates class or yoga class or whatever it might be in major cities and have fantastic inventory show up.
The third part of our strategy is, look, our North American business is clearly doing well. We’re focused on extending to the rest of the world. We made some pretty good progress in Europe last quarter.
BI: You’ve had a couple good quarters now, but the stock is still 50% off the IPO price, and you had to fire the cofounder and CEO. Looking back, what went wrong at Groupon?
EL: We didn’t do a great job managing the process of being public and managing our own perceptions. We also weren’t focused enough. We were working on too many things at one time.
I think when we started Groupon in 2008, the daily deal business was new and exciting. People were getting these emails and it was fresh, you’d open it up, it was a way to surprise and delight consumers.
Because of the success we had, the business model was copied and cloned so many times worldwide that people being inundated with offers from all kinds of companies and it lost some of its excitement.
So we’ve worked hard over the last couple years to really migrate from those emails to being a true ecommerce marketplace of deals.
BI: You’re a very successful start-up investor. And you’ve been the CEO of lots of smaller and mid-stage companies. You’ve been a successful entrepreneur. But running a large global, public corporation is a very different job. Why are you the right guy for this job?
EL: Ever since Ted and I got here in February, we haven’t been spending a lot of time thinking whether we’re the right guys. We were thrust into a situation where we were forced to think about, how do we do the best job we can do? That was all that was on our minds.
What the board concluded is that the very foundation of Groupon is being built, that this business model is so young, and still in a transformative stage, that really there was something about having a co-founder, having an entrepreneur, having somebody like me as part of the process, that was helping.
The team is gelling, things are starting to really work, and I think the board came to the conclusion, as eventually did I, that it would be more disruptive to bring somebody else in.
BI: Are you going to be CEO in five years? Or is this just a short-term move to get the stock moving?
EL: My only focus is how do I do the best job I can. I’m not going to worry how long I’m here. Ultimately the board will decide how long I’m here.
I don’t come at these things at all like an investor. I’m a cofounder of a lot of companies, and I put in far more time than money to get them off the ground. I want these business to succeed and thrive for decades.
BI: Under the previous CEO, Andrew Mason, Groupon had a distinct employee culture, a sort of zaniness. It seemed o really jibe with employees there. How’s morale and how’s turnover been with the new culture?
EL: The culture of Groupon is very strong.
As much as Andrew certainly has a fantastic sense of humour, the culture of Groupon was really built by our editorial roots. We have a humour team and an editorial team that’s very big and they’ve always been a big part of defining our culture. Aaron With, our head of editorial, is the one that who came up with the name Groupon. It was also his cat that got originally photographed. He’s still the head of editorial today. Aaron was one of our first five or six employees. And he was running the group back and he’s running it today. You have a great number of people who have been here now over these four or five years, some of them even predate Groupon and go back to The Point days.
We’re a public company and we have to be responsible to our shareholders, and many of our employees are shareholders. So they tend to feel best about themselves when they feel that the company is actually thriving and being successful and achieving its objectives.
I think employee morale is dramatically better than it was when I got here five and a half months ago. I think people feel like they’re on a winning team and they feel like we have a very clear sense of purpose and mission and it’s still a fun place to work.
BI: Right now, the average consumer would say a groupon is a thing you get in your email. What do they think when they hear the word Groupon in five years?
EL: I think if we’re successful five years from now, they think to themselves that Groupon is the predominate mobile commerce company in North America. They’ll think of Groupon as a part of daily life — the place I check first when I want to buy anything anywhere anytime.