BEST OF THE WEB: How greed has ruined Groupon
Wednesday, March 20, 2013/
A few years ago, Groupon was on top of the world.
The company was enjoying rocketing success under chief executive Andrew Mason, with millions in revenue and a growing team. The concept of group buying was completely new, and the business was milking all the attention it could get.
Fast forward to 2013 and things have gone horribly wrong. Founder and chief executive Andrew Mason was recently fired from his position, while the company’s shares have plummeted by 80% from the company’s float in November 2011. It still struggles with profitability.
Now, in this new piece over at The Verge, the publication ventures into how the company has fallen so far. And it’s got everything to do with the company’s greed.
Back in 2011, the company, and Mason, were eager for power. And now, it argues, chairman Eric Lefkofsky continues to drive that greed.
“The truth is, Eric is a brilliant guy,” said a former executive who worked closely with Lefkofsky at Groupon. “But his greed overwhelms his intelligence. It drives him to make short term decisions, always in the pursuit of bigger, more, now. And he does not mind if other people get burnt along the way.”
Perhaps the biggest point in Groupon’s history is the $US6 billion takeover offer from Google back in 2010, when the company had just $30 million in revenue. But when Lefkofsky heard the argument Groupon could be bigger without it, he headed towards an IPO, pushing overseas – but the growth was costly.
“I have never seen working conditions as bad as this at any tech company in my entire career,” said a source who visited multiple parts of Groupon’s sprawling empire. “Call it a boiler room, call it a sweatshop, it was the exact opposite of what Mason had created in Chicago.”
For Lefkofsky, it seems, the international expansion was simply a “land grab”. And now, sources speaking to The Verge say he’s keen on expanding the business yet again.
“To him, greed is good. Money is what matters. He will cross the line to get more,” said a former Groupon executive. “His reputation, Groupon’s legacy, do not matter.”
The story is a solid read on one of the tech scene’s most fascinating companies – and it’s definitely worth a read.
Why Kickstarter won’t be selling any time soon
Kickstarter has been one of the biggest success stories of the past few years. The crowdfunding site has not only become a success on its own, but has allowed artists, entrepreneurs and manufacturers to create entire business concepts by asking users for money.
And in this new piece over at FastCompany, the founders explain why they will never, ever sell the company: a moral obligation.
“The thing is, if Michael Bay came along and wanted to do a Kickstarter we’d probably tell him, please don’t,” Strickler tells me. “I would never want to scare the girl who wants to do a $500 lithography project, ’cause that’s why we started this thing. We think we have a moral obligation to her.”
There are actually some more interesting revelations in the story, such as an exploration of why the company has had to crack down on gadget makers. It’s the founders’ first big interview since the company gained success, and delves into the founding and ultimate success of the business.
One particularly noteworthy inclusion is the fact all projects are reviewed by a team:
A team of six community managers reviews every Kickstarter project before it goes live. “The only thing we’re looking at is, Is this a creative project?” says Cindy Au, who reviews submissions as the company’s head of community.
“For us it’s really important to keep creativity separate from other intentions.” Roughly 75% of all projects are accepted; those that are rejected receive a terse form letter.
Something that’s become a problem for Kickstarter has been clamping down on those projects deemed unsuitable, with a list of 32 different types of projects banned. But even more fascinating are the founders’ mentality on ethics – it doesn’t want large projects to scare away the smaller creators.
It’s a fascinating company with a strong ethic. Even more evidence of this is what one backer, Chris Sacca, had to promise in order to invest: a pledge to never sell his shares.
“I had to do a little soul searching to sign up to that idea,” Sacca said on the podcast This Week in Startups. “Perry and Yancey run the company for the longest, longest term… There will be no liquidity in that company for 20 years.”
Chen confirms this dictum: “Twenty years is kind of arbitrary, but what Chris said is true in spirit,” he says. “We hope that we can return some of these funds to the shareholders through some kind of profit sharing or dividend – and that’s it.”
If you’re a fan of Kickstarter, and what’s happening in the crowdfunding space, this story is definitely worth a read.
Facebook’s growing pains
Facebook has enjoyed a wealth of success, and although the company has struggled to keep its share price as high as it would like, things are going well.
But over at Buzzfeed, there’s an interesting piece in which Facebook app developers explain they’re a little concerned.
As the piece explains, it turns out the graph, which traces your relationships with other people – the Facebook ecosystem, in other words – is losing its value. The problem is that people don’t update their profiles. And as the piece asks, “what good is Facebook…if your friends aren’t really your friends?”
Facebook users are beginning to show signs of boredom; a Pew Research Center report found an “overall decrease in their interest in the site” as one of users’ main reasons for taking a break from it, which over half of users said they had done.
In addition, with a billion people already signed up, Facebook is simply running out of new users. (In August of this year, more than 100 million of Facebook’s users will have been on the site for more than five years.)
Facebook is certainly still powerful, but as it ages the company is facing a big problem – how to maintain relevancy and value with an ageing network.