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Originally Posted by pilsenarch
and maybe I didn't emphasize my point... you can't compare Groupon to Google due to the significantly greater labor costs that Groupon has in their business model compared not only to Google but just about any other successful internet business...
it is too easily replicated (as has already been shown) and Groupon's profits are going to continue to decline per transaction as competition continues to increase...
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They have yet to lower the rates they are charging so saying "Groupon's profits are going to continue to decline per transaction as competition continues to increase..." is completely misleading as their profits per transaction haven't fallen at all unless you are counting acquisitions as a reoccurring expense.
As far as labor costs go, who cares? Groupon isn't an internet company, it's a marketing company that uses the internet. It's essentially a 21st century version of Montgomery Ward's or Sears using a new means of marketing to push products to it's audience. Also, Groupon isn't selling it's services to the public unlike all the internet companies you are mentioning. It is selling its services to other businesses which always requires a large sales staff. So saying "They have lots of employees and therefore can't be profitable because no other internet companies have lots of employees" is absurd. This is an entirely new business model, no one knows whether it will really work or how and who will adapt it to make it work.
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Originally Posted by aic4ever
I think this is basically what the SEC is reviewing in their application for their IPO. There is question, and I am sure to some extent it is valid, as to whether their business model is sustainable. If it turns out that they are ignoring costs in projecting profitability, then that is unsustainable, and needs to be corrected.
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No, the SEC was reviewing it because they tried a type of accounting that ignores marketing costs which would indeed have inflated their potential for profitability. The SEC doesn't review business models for "sustainability", it reviews the applications to see whether or not they are misleading to the public. After all, there are plenty of unsustainable business models that people buy shares in knowing full well it's only going to last 5 or 10 years or whatever. All business models are unsustainable in the long run.