Saturday, June 04, 2011

HEARD ON THE STREET: Beware Groupthink on Groupon - WSJ.com

More on Groupon’s accounting innovation

To create a patina of profitability, Groupon invents a bizarre profit-before-costs measure that excludes online-marketing expenses. These added up to a whopping $180 million in the first quarter. Excluding these and other costs flips the company's first-quarter net loss of $117 million to an "adjusted" profit of $82 million. But why should online ads be excluded while Groupon's Super Bowl ads aren't?

Investors shouldn't assume these costs will magically disappear. There is nothing to stop subscribers switching to rival deal sites. So, Groupon will likely need to keep spending heavily on marketing to boost its customer base and fend off heavyweights like Facebook and Google as they jump into the business.

HEARD ON THE STREET: Beware Groupthink on Groupon - WSJ.com

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