it's insane not to see that marketing expenses will drop and that they can be comfortably profitable.
Look, projections based on assumptions are part of the investing game. And while I appreciate your enthusiasm, the likelihood that you are correct is not the point.
The point is, there is already an existing method of disclosing assumptions and projections for the future, it's called a pro-forma financial statement. Groupon can simply state their assumptions for when their customer acquisition expenses will go away and give us their projection for what they think their financials will look like at that point in time. In the time-honored format that has served many companies before them.
Giving us a new number for what their business looks like now is ridiculous, because there already is a standard way to share their hopes and dreams of what their company will look like in the future. And that has nothing to do with what you or I might think of their assumptions about what might happen in the future.
"Look, projections based on assumptions are part of the investing game... Giving us a new number for what their business looks like now is ridiculous"
A thousand times, yes!
Investors need baseline, objective, bottom-line numbers to work with. These numbers help potential investors evaluate where the business is at today, and (perhaps more importantly) help current investors evaluate whether the past projections met with reality.
There are plenty of places that companies are able to spin the numbers to tell their story of fabulous fortunes and world conquest. But there are certain places where you have to let the tried-and-true numbers speak for themselves without someone standing in front waving their arms.
It's like going to vegas. It's easy to say: "Hey, I about broke even. Even if I did lose a little money on the tables, I got some free drinks and I had fun this weekend." Sometimes that story is true, and sometimes they are some pretty-darned expensive free drinks. Your bank account will tell the story, and you wouldn't let a casino owner jump in front to "help you interpret" the numbers.
I'm actually not defending this particular accounting method since I expect they've filed proper paperwork that explains all their income, expenditures, profit, taxes, etc.
What I'm defending Groupon against (not that they need me) is the ridiculous pot shots at their business model as of late and that somehow they're trying to scam people (You'll probably see a few show up in the comments today).
They've grown a phenomenal amount of revenue faster than anyone ever has before and they've apparently spent quite a bit of money to acquire e-mail subscribers. Groupon is a stupendous outlier when it comes to all businesses before it and the biggest question people have is whether or not the business is sustainable. When these significant marketing costs go away, this should be a very solid business.
I get that you are defending their business model, thanks. The whole point of starting a business is to lose money today building an asset that will make money tomorrow, so what's wrong with that?
In days of yore, companies would not go public until they were actually making money, but tail fins fell out of favor, and conservative investing went with it.
All I am saying is that they should use standard financial tools when promoting their business to investors. I am sure that plenty of people, possibly yourself included, will be just as bullish on their prospects.
Look, projections based on assumptions are part of the investing game. And while I appreciate your enthusiasm, the likelihood that you are correct is not the point.
The point is, there is already an existing method of disclosing assumptions and projections for the future, it's called a pro-forma financial statement. Groupon can simply state their assumptions for when their customer acquisition expenses will go away and give us their projection for what they think their financials will look like at that point in time. In the time-honored format that has served many companies before them.
Giving us a new number for what their business looks like now is ridiculous, because there already is a standard way to share their hopes and dreams of what their company will look like in the future. And that has nothing to do with what you or I might think of their assumptions about what might happen in the future.