The first article focuses on Groupon's 4,800-strong salesforce and CEO Andrew Mason's statement that he plans to replace the bottom 10% of the salesforce. The link is here: http://www.reuters.com/article/2011/10/26/groupon-salesstaffcuts-idUSN1E79P0YQ20111026. In my view, replacing poor performing salespeople only makes sense, but it's unclear to me whether this is a new policy or an existing policy that's being highlighted.
The second, and more interesting article in my view, focuses on competition in the daily deals space and barriers to entry. Here's the link: http://www.reuters.com/article/2011/10/26/markets-stocks-ipos-idUSN1E79P2DZ20111026. My view is that three is significant competition in the space and very low barriers to entry. The combination of these factors could lead to margin compression. In my experience, this is similar to a distribution business model, and even though margins may be strong now, over the long term, margins may be pressured. On the other hand, in the near term, Groupon has created a recognizable brand and an overwhelming market presence. This suggests to me that in the near term, the business model may be fine, but in the longer term may come under pressure.
According to the second article, the IPO should price on Nov. 4. I'm curious to see how it prices and trades in the aftermarket.