What Groupon’s Firing of Andrew Mason Means for the Company and the Industry

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On Thursday, Groupon booted Andrew Mason from his seat as the daily-deals company’s CEO, less than a day after it announced disappointing fourth-quarter results and a tepid forecast for the first quarter of 2013.

Groupon

While less than surprising, Mason’s firing marks the end of an era filled with offbeat humor, bad accounting and controversial Super Bowl commercials.

That said, Mason and his tenure at Groupon did have laudable highlights, including an IPO that was the second biggest for a U.S. Internet company. Groupon also blazed a trail and carved out an industry that countless copycats and innovators benefited from.

Now that Mason has exited the biggest stage in the business (with a severance package totaling $378.36), what does the future hold for Groupon and the deals industry as a whole? We spoke with eight experts to find out.

Jana Francis, co-founder and President, Steals.com:
“In the wake of Andrew Mason’s firing, deal sites should pay close attention to his parting words: ‘have the courage to start with the customer.’ Daily-deal sites everywhere need to take a close look at themselves and really consider whether or not they’re truly putting their customers first. Many have made revenues their top priority, with quality and service taking a backseat. They’re pushing out as many deals as possible, creating shopper fatigue and very little actual value to the customer. Too many sites — both voucher and product-driven — also leave the fulfillment of their deals to their vendors, which means they ultimately have no control of the brand value or customer experience. It’s a recipe for disaster and the model needs to change. The recent firing of Mason at Groupon should force the deal-site industry to re-evaluate their business practices and focus on what’s most important: the customer.”

Michael Tavani, co-founder and head of product, Scoutmob:
“Andrew had an incredible run that was very impressive. It’ll go down as one of the fastest growing companies ever, and you have to credit him as the founder and CEO. Also, he practically invented the local daily-deals industry. It turned out to not be sustainable enough for the investment and money required to scale that big, but a lot of good was created by him. The real downturn, in my opinion, is that they grew too fast for their own good. They weren’t forced to figure out the real economics.

Ultimately, it’s good for Groupon to start fresh and get some new blood in there. The whole industry won’t be impacted at all by the news.”

David Moore, CEO, City Rewards Network:
“When Andrew Mason founded Groupon, he failed to recognize a fundamental principal: All parties involved in a transaction must benefit if you hope to sustain a long-term business model. Mason essentially took merchants’ profits to increase his revenue model, and his shareholders are paying the ultimate price. As Groupon went into high-growth mode, it only exacerbated the problem.

Even with Mason out, the Groupon business model is still flawed. Merchants are required to deeply discount to the point of losing huge on campaigns. They don’t return to run another Groupon. There is a happy medium in the daily-deal industry, and the new Groupon CEO, whoever it will be, must figure that out quickly. The company must make amends with merchants. Groupon has contaminated the coupon/discount industry, and they need to repair that as fast as they can.

My company also works directly with merchants, and our business model has lasted more than 12 years because we always consider how it affects the merchant offering the discount or deal. It’s a three-legged stool: consumer, merchant and coupon provider. Groupon was greedy and took more share from the merchant than was required.

Andrew Mason - Groupon
Andrew Mason, former CEO of Groupon

I’ll add that what Mason did with Groupon as an entrepreneur and for the startup rocketing to IPO is admirable. However, the founder of a high-tech, high-growth company rarely has the skill set as a CEO to take the company to the next level. Groupon is still a very valuable company and it can be salvaged if they find the right executive team to do it.”

Phil McDonnell, co-founder of CoupFlip:
“The storm clouds above Groupon are not evaporating simply because Andrew Mason has left the building. Now is the time for the leadership team at Groupon to act and address the core issues that still exist around daily deals. Specifically, Groupon relies on selling 5-6 deals to each active customer. That strategy only works long-term if you’re customers have great experiences with their deals and come back for more. Ask yourself a simple question: If you spent $50 on a Groupon and didn’t use it, would you buy a Groupon again? Today, one in three deals still goes unused. Groupon needs to confront a few key issues in 2013 if they want to have a sustainable business in 2014 and beyond:

- I can’t schedule a deal: Many people get stuck with deals to hair salons, hotels, etc., that they simply can’t schedule for various reasons.

- I won’t use a deal: Many people buy a deal and realize they don’t really want or need that. Simply put, plans change. Secondary markets play an important role here, but most people still let these deals expire.

Without swift, decisive action, Groupon is bound to continue to underwhelm customers and businesses alike. That said, the silver lining here is that no company is better positioned than Groupon to build a great solution. This is Groupon’s race to lose.”

Andreas Scherer, managing partner,

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