In today's world, instant access to information, a seemingly unlimited number of "experts," and the "what have you done for me lately" mentality of investors have all made a thick skin a prerequisite of today's CEO. Need proof? Look no further than Groupon (NASDAQ:GRPN) founder and CEO Andrew Mason.
Since early December of last year, Groupon's share price has risen and fallen based on the latest rumors regarding Mason's fate -- will he stay, or will he go? Based on investors' response to each "report" of Mason's status as Groupon CEO, the consensus is pretty clear: many feel it's time for a change at the top.
Can't we all just get along?
The angst surrounding Groupon began with its IPO, which hit the market a little over a year ago to great fanfare. At $20 a share, Groupon was valued at $13 billion and all was right with the world... sort of. Mason did what he'd set out to do: go public, and secure as much value for himself and Groupon shareholders as he could.
Groupon's now-infamous accounting irregularities had, at least for a short while, been swept aside by its successful offering. Concerns regarding the late moves by Groupon's underwriters to up the IPO offering price from its original $16-$18 a share range to $20, and increase the number of shares available by an additional 5 million, were also largely forgiven -- at least initially.
And, of course, there is the infamous offer from Google (NASDAQ:GOOGL)in 2010, to purchase Groupon for $6 billion; which turned out to be a paltry sum relative to its IPO value a year later, but a deal that looks pretty good in hindsight. Though 2013 is upon us, and its been over a year since Groupon's IPO, Mason is still held accountable for what shareholders perceive as sticking it to IPO shareholders, and a missed opportunity.
The problems are many
"Deal fatigue" is a phrase that was coined several months ago by analysts who insisted Groupon was going down. Why? Because there are "so many companies now offering consumers a multitude of options for online discounts on goods and services." And that "multitude of options" includes some big-name players that, according to Groupon bears, will prove too much to handle.
Analyst's concerns about a crowded market for online deals, and some serious competition, are legitimate challenges. Take Google as an example. It wasn't able to secure an acquisition for Groupon, so it did the next best thing and introduced its own service, Google Offers. With expanding markets, and its industry-leading Android-specific app providing instant access to its its Offers service, Google is a legitimate threat.
And Google isn't Groupon's only heavyweight competitor, by any means. Facebook (NASDAQ:FB) has long been in search of new revenue sources from its billion users, and has addressed those concerns by expanding advertising alternatives, adding return-on-investment tools for its customers, a jobs app, and of course its recently announced internal search engine. Along the way, Facebook's also introduced both its Gifts and Deals services, directly competing with Groupon in both areas.
As if Google and Facebook weren't enough of a headache, Groupon's online deals business also butts heads with Amazon.com's (NASDAQ:AMZN) LivingSocial partnership, and its AmazonLocal service. Like Google and Facebook, Amazon.com is in the enviable position of having multiple lines of revenue, allowing each industry leader time for their respective online deals solutions to gain traction. With that kind of competition, Groupon needed to do something -- and fast -- before getting run over.
The case for Mason
Making a case for Mason to stay on as Groupon CEO won't sit well with a lot of Groupon investors (its stock-price movement makes that abundantly clear). But before you dismiss Mason out of hand, let's take a look at a few of the steps he's taken to ensure Groupon remains a viable long-term entity.
As Facebook's learning, developing multiple revenue streams isn't just a good idea; it's a necessity. Mason, to his credit, understood the need to expand offerings some time ago, and has taken definitive steps to find alternatives to Groupon's deals business. Groupon Goods has taken some flak, primarily because of its lower margins. But as new as Goods is, it's already tracking at about $1.5 billion in annual sales, and even more important it provides alternatives to Groupon's deals business.
Recent acquisitions, including buying retail sales solution provider CommonInterface and location-based discovery start-up Glassmaps, support Mason's alternative revenue-enhancing efforts. Low-cost merchant payment services, a new customer ROI tracking tool, and an emphasis on mobile computing solutions are some of Groupon's ancillary revenue-generating opportunities, each limiting its reliance on the online deals market.
Q4's on tap
A profit is expected in Groupon's fourth quarter, as is continued growth in revenue across multiple business lines, all while lowering customer acquisition costs. That's normally a pretty nice trifecta. But with Mason still in the picture, short-term Groupon investors will act based on the latest rumor. For Fool investors, Groupon's worth a serious look for the aggressive, long-term growth portion of your portfolio.
Fool contributor Tim Brugger has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, Facebook, and Google. The Motley Fool owns shares of Amazon.com, Facebook, and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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