Meteoric rise to spectacular crash: 10 years on, ousted Groupon founder Andrew Mason opens up about where it went wrong
Wednesday, October 17, 2018/
Remember Groupon? Called the fastest-growing company of all time, it was a humble startup that shot to billion-dollar revenues and global reach within just a few years — and which listed, sank and sacked its chief executive officer almost as swiftly.
Launched 10 years ago by first-time founder Andrew Mason, Groupon offered discounts at retailers and restaurants if a certain amount of people signed up to them.
After six months of operating as Groupon in Chicago, the startup expanded to Boston. Three months later, it launched in New York. Eventually, it was using a cookie-cutter approach to launch in a new city every week.
Two years after its initial launch it was making tens of millions in revenue each month, and was valued at billions. The growth was faster than Facebook’s, Apple’s or Google’s.
But, fast-forward a few more years and Groupon’s board was turfing its founder and chief executive officer out the door.
Speaking on Gimlet Media’s Without Fail podcast, Mason said, looking back, “the whole experience now seems like this fever dream that almost happened to someone else.”
Mason didn’t mean to build a coupon site. The original concept was The Point — a platform where people could commit to causes or actions if a critical mass of other people did it too.
But, that model didn’t really work, and the startup was about to lose its funding unless it came up with one that did. People were already using the platform to secure discounts, and so Groupon was born.
“In many ways … it always felt like kind of the dumbest and least inspiring application of the model compared to what we imagined it being used for, which was power to the people,” he added.
The speedy growth was somewhat baffling to Mason, who very quickly had to transition from a small-time founder to a leader of a 200-strong, and growing, workforce.
“One day you wake up and you have hundreds of people working for you … it’s really hard to imagine how that couldn’t be a complete shit show,” he said.
He grew Groupon to what it was almost by accident.
“There was a lot of stuff in the press trying to kind of deify and turn the chief executive officer into this hero or genius or something that like. I felt like those things, but not with Groupon,” he said.
Rather than a genius idea well executed, Groupon was the result of a founder who had no business experience, and who stumbled upon something successful as he was desperately grasping for anything at all.
“Today, I would never have gotten myself in a situation where the conditions for Groupon could have happened. Because it took an incredibly naive idea, which was The Point, and messed that up,” Mason said.
Two years after launch, the company was “doing over a billion dollars topline”, and famously turned down a $5 billion buyout offer from Google.
According to Mason, the board was happy with the growth and figures, but decided if Groupon was not going to be acquired, it would have to go public.
In order to secure returns for investors, “you have to go public at some point”, Mason said.
And in October of 2011, it did.
This is where Mason’s problems really started. In the 90-day ‘quiet period’, before a business lists, the negative press began to appear, he explains.
“Before then we were the darlings of the internet. There had been very little negative press about Groupon and everything was just going swimmingly, and then we entered this quiet period and we just got hammered,” Mason said.
“It became a huge distraction,” he added.
After the listing, the PR crisis got to a point where Mason and the executive team were spending 50% of their time managing the “fall out of this one decision to go public,” rather than continuing to build the business, he said.
“We weren’t ready for it,” he adds.
Groupon wasn’t meeting its targets, and several board members wanted Mason to step aside. When the business underperformed for one quarter too many — the stock was about a quarter of its listing price— he knew he was gone, and started trying to recruit someone to replace him.
Instead, the board asked him to leave immediately.
“I didn’t feel like that was the right decision,” he said. So he refused to resign.
“I just would watch these CEOs resign in tumult. Everybody knew they were fired and yet they still felt the need to put up this facade as if it was their own choice. I just didn’t want to live with that for the rest of my life,” he said.
If Mason has taken a lesson from all of this, it’s about sticking to his principles. The startup was born out of pro-customer, power-to-the-people principles.
But, others within the business would argue that, as a data-driven company, they should run tests and see what the data says.
For example, they tested sending more than one offer email a day, Mason said.
“Maybe people would unsubscribe at a slightly higher rate, but the increase in purchasing would more than make up for it.”
In retrospect, some of those data-driven decisions were bad ones, Mason said.
“When you’re in hypergrowth like this, a lot of times you don’t have time to see what is going to happen to the data in the long-term.”
Making those wrong calls can lead to “death from a thousand cuts”, Mason said.
They may not make a huge amount of difference as a one-off, but when you compromise your principles too often, the startup can lose its spirit.
“There are certain things you have to be religious about in the company,” he says.
Sometimes you have to go with your gut, not with the data.
“That’s what I’ve taken away from this,” he says.