Groupon - The Most Spectacular Rise And Fall The Internet Has Ever Seen
"After four and a half intense and wonderful years as CEO of Groupon, I’ve decided that I’d like to spend more time with my family. Just kidding – I was fired today. If you’re wondering why… you haven’t been paying attention."
An unusual yet memorable way to address past mistakes - one not too many CEOs are prepared to take. Unlike the others, Andrew Mason, the founder of Groupon, did it with the utmost decency and respect for his employees.
Groupon’s story wasn’t always as dark and brutal as was Andrew’s farewell letter. There was a time when this company lit the Internet so much, even Forbes categorized it as the fastest-growing company ever!
It was all Andrew’s fault - pun intended!
How he transformed himself from a sleepy-looking guy, to a man who managed 10,000 employees in his mid-20s, is one hell of a story!
Andrew was born in 1981 in Mount Lebanon, Pennsylvania, a small suburb of Pittsburgh. He was lucky to be part of a family of entrepreneurs - his father sold diamonds and his mother was a professional photographer. From a very young age, Andrew learned the value of building something himself and he followed that unwritten rule throughout his entire life.
He didn’t wait too long to launch his first business, starting his own weekend bagel delivery company at the age of 15. He even gave it a name, like a proper entrepreneur would do - Bagel Express! He finished high school in 1999, graduating from Mt. Lebanon High School.
However, when it was time to enroll in college, Andrew made a completely unexpected move - he went to Northwestern University, to study music. Music gave him the freedom to express his creative mind in an artistic way, a trait he would later use to build his company around.
Dropping Music For Computers
Sadly, after graduating in 2003, Andrew realized that artists have to work twice as hard to bring meals to the table, so he decided it was time to make some changes. He did what any visionary of the new Millennium would do - he learned to code! Becoming a software developer wasn’t easy at all, but Andrew was determined to prove he’s suitable for the IT world.
He got a job at InnerWorkings, Inc., in Chicago, a job that turned out to be a life-changing working opportunity. Andrew met the founder of InnerWorkings, billionaire businessman Eric Lefkofsky - and future co-founder of Groupon!
However, his time in InnerWorkings was over after three years. In 2006, Andrew earned a scholarship at the University of Chicago's Harris School of Public Policy. But, being the going-with-the-flow type of guy he was, he didn’t last too long at school either. He dropped out after a few semesters, but for a good reason - he was about to start a company! Yes - another company!
The Almost Failed Partnership
It all started when Andrew received a call from his previous boss, Eric, about a potential business idea. Eric was prepared to invest a million dollars in seed money for Andrew to launch a company named The Point. The idea about The Point was the following one - it was a program designed to organize actions for a cause - product complaints, auctions, charities, etc. Andrew got the idea after he had a bad experience closing his telephone contract. He was under the impression that if a group of people demanded changes from a company, the company would act on it.
The Point was difficult to explain to the outside world. Even Andrew wasn’t aware of what he and his team were trying to achieve, but it was working. More and more people wanted in and that meant only one thing - better ideas.
At one point, people got the idea of a discount for more people, but only if those exact people purchase the product. Even though it sounded good on paper, the idea came at the worst possible moment. It was 2007 already, The Point was nine months into the business without making any progress and Eric was becoming a bit impatient which meant that Andrew and his team could lose the funding.
The A-ha Moment!
It was then and there, that Andrew decided to go with the group buying no matter how crazy it seemed at the moment. All they had to do was to find one deal per day and email the deal to a list of people who would be interested in using the deal. They built a website called getyourgroupon.com and were ready to launch!
Their first group deal was for sports lingerie - it wasn’t a good start.
But their second deal was at Motel Bar, a pizza place outside of their office. Their way of attracting customers was every bit of fun - Andrew and his team followed employees in the building or stood in front of the bar, offering two-pizzas-for-the-price-of-one coupons.
They managed to hand out 20 coupons, but it still wasn’t enough!
The real groundbreaking moment came when Andrew and his team sold 500 coupons for a sushi place. Soon after, they realized it: they had а golden goose in their hands!
Thus, Groupon Was Born
Officially, Groupon was launched in November 2008 in Chicago. The business was going great and six months after the initial launch, the team decided to move to another city - Boston, Massachusetts.
But once they arrived in Boston, they were in for a surprise. They visited small local businesses for collaboration and they discovered that they were being cloned by many online businesses. Andrew was furious - he wasn’t even that long in the business to be copied and the audacity these business owners had? Absurd!
This motivated the team to become even better at what they do and to prove to the online world that they’re the #1, not anyone else! They took their roles pretty seriously and three months after their launch in Boston, they launched in New York too.
After that, Groupon was on a roll.
From launching in one city a month, they upgraded to two cities a month and later to four cities a month - it was that fast!
A year and a half after founding the company, Andrew and his team were responsible for managing 350 employees! Around the same time, the company was worth over $1 billion, making a claim for the title of being the fastest-growing company ever!
Apart from Eric, as the co-founder and investor in Andrew’s potential, Groupon received help from other investors too. From 2008 to the beginning of 2011, the company held 4 seed rounds and managed to acquire more than one billion dollars in investor’s money!
But then, things started to crumble…
Trouble In Paradise
Groupon became so popular that by late 2010, Yahoo and Google wanted a piece of the pie. Yahoo’s offer was for $3 billion and Google doubled that up - $6 billion!
However, Andrew’s goals for his company were bigger than just money. He felt that if he sold the company at this point, it would be like going to the dark side and he wanted to create something bigger with Groupon.
Groupon’s board took the idea seriously and Andrew found himself in a meeting with Yahoo representatives. At this point, he felt proud of the company, but at the same time curious so he sat down to have lunch with Yahoo’s people. By this point, he was a vegetarian for around 10 years, but he ordered a steak - if I was going to sell my company, I’m going to do it while eating a steak - those were his exact words!
He politely declined both of the offers and continued to pursue Groupon’s goals.
Groupon went public in November 2011 - raising $700 million in total and increasing Gropun’s value to $12 billion!
But Groupon’s success was only on paper, as there were tons of sketchy things going on in the background.
The Legendary Fall
In August 2011, right before going public, Groupon faced the harsh reality - the company used a non-standard accounting metric called Adjusted Consolidated Segment Operating Income - ACSOI. According to this system, the company was completely profitable - more than $60 million for 2010. However, once they shifted to using a more standard system, they reported a financial loss of $420 million for 2010! It was a shock for anyone in the business world, that a company of such size could afford to make such a wrong business move.
Everyone blamed Andrew and for a good reason - with his nonchalant style of managing the company, a crisis of this kind was bound to happen. He was even named “The Worst CEO Of The Year” by CNBC reporter, Herb Greenberg.
What followed was a long-overdue move from Groupon's board - Andrew was fired on February 28, 2013. It was expected - the company lost 80% of its value after going public in 2012. Andrew accepted the new situation and made it all public with his letter of resignation, a letter that made him even more popular than before.
Luckily, Groupon had skillful managers who set about to raise it from its ashes.
Today, Groupon is worth $2.84 billion and has more than 6000 employees. The company is spread in almost all continents and it continues to be a top choice for anyone who likes a good deal!
However, nothing of it would have been possible without Andrew’s endless persistence and constant curiosity to do something different. Even though his story ended ingloriously, there’s one thing we should take away from his deeds - he followed his dream and made a lot of people happy through it!