Groupon Sales Team Files Class-Action Suit

<i>suddenly unpopular with both users and investors...</i><p>The first rule of bad journalism is to confuse the first and second derivatives. Groupon is enormously popular with users and investors--it's just not the most popular it's ever been. Yipit's fairly recent data indicate that while the daily deal market contracted slightly over the summer, but Groupon shrank more slowly than LivingSocial ( <a href="http://techcrunch.com/2011/08/25/yipits-daily-deal-report-groupon-up-livingsocial-down-travel-deals-take-off/" rel="nofollow">http://techcrunch.com/2011/08/25/yipits-daily-deal-report-gr...</a> ).<p>In "Fooled by Randomness," Taleb points out that the more frequently you measure results, the more random they are. Second-by-second, Warren Buffett is losing money just about half the time.<p>Groupon obviously has problems, and LivingSocial is executing amazingly well, but it should be laughable to call them "unpopular" rather than "less massively popular than at their peak a couple months ago," in the same way that you wouldn't call someone "poor" because they moved down a spot in the <i>Forbes 400</i>.

This had to be sort of expected. Groupon has grown fast and they turned down the acquisition offer from Google. This suggests that they were messaging new employees "We're taking this one all the way to IPO." And then proceed to ply new employees with stock and spreadsheets showing great returns. Many people at a 'startup' understand that they are sacrificing a bit of pay or benefits now, for a potentially much larger upside later. And Groupon certainly fit the mold.<p>Now Groupon pulls back on their IPO plans, folks who had been "taking one for the company" feel cheated because they have a harder time imagining huge returns than they did before. (On a related note I've had this issue with calling options and stock 'compensation' in the past because really until someone buys your paper it really isn't something you can spend) So the sales folks turn around and say well if we're not going to get that money we foolishly believed would be dripping out of the IPO spigot, they're going to ask for it in cash.<p>I really wonder if they would have crossed this threshold (suing) if the 'big cheeses' in the company hadn't decided to do a huge funding round to pay themselves off. (another way to convert 'potential' in earnings into cash).

Completely misleading title - it should read 'Groupon Salesperson Files Class-Action Suit'. You only need one person to file a lawsuit, class-action or otherwise, and there's no indication in any of the docs that any other members of Groupon's sales team are involved.<p>From the filing (in Justia - <a href="http://docs.justia.com/cases/federal/district-courts/illinois/ilndce/1:2011cv05685/259040/1/" rel="nofollow">http://docs.justia.com/cases/federal/district-courts/illinoi...</a>) it looks to my completely-not-an-expert-eyes like Groupon's mistake here was not treating its salaried employees like salaried employees - on rare occasions it gave them overtime pay, and on the attached pay stub hours and an hourly rate ($15.62) are clearly recorded. Whoops.

A side note - I have been supremely impressed with Groupon's customer service. Emails personally returned within minutes and no problem refunding groupons I no longer wanted.

Interesting tidbit from the article that I did not know:<p>"a federal judge in San Francisco permitted a tour operator to proceed with a merchant class action lawsuit over alleged false advertising"<p>leads to<p><a href="http://www.reuters.com/article/2011/08/24/us-groupon-lawsuit-idUSTRE77N6NY20110824" rel="nofollow">http://www.reuters.com/article/2011/08/24/us-groupon-lawsuit...</a>

To summarize the situation (someone please correct me if I am wrong?):<p>1. Files for IPO<p>2. ASCOI (Adjusted Segmented Consolidated Operating Income) falls under scrutiny from public &#38; SEC<p>3. VP of Global Communications resigns<p>4. Internal Memo "leaked" to major press outlets<p>5. SEC investigates said memo<p>6. Sales Team files Class-Action suit<p>Wow.

I never really understood Groupon's super high valuation. I think they grew too fast, and possibly needed to cut corners to sustain their growth. Can anyone explain what the appeal has been for investors?

I see Groupon's rise and fall as similar to MySpace. <i>traffic for rival deal site Living Social rose 27%</i> Maybe Living Social is the Facebook in this comparison.

I would recommend to groupon instead of forcing businesses to give deals. Set up a system that has the users bid to spend a certain amount for a good or service. Once you have enough people agreeing to it, there's no way a business would turn it down. You could cut the work force in half and let the users have control of where they get deals. That's my 2 cents.

This is really sad. In my limited understanding of business, I always thought that Groupon's greatest asset was it's sales team. Who else has a sales team that can hit so many small businesses across the us so fast. I was hoping that they would leverage this asset in more ways than just selling advertisement.

They should have taken that google offer.

Poor business fundamentals create poor business outcomes. Groupon needs to reevaluate itself, and if it must, downsize and regrow with a better product. Basically, Groupon needs to figure this out - or everyone else will - and it won't be good for Groupon.

The turning point for Groupon was that awful, offensive Superbowl advertisment.

a boom needs a webvan

Almost starting to feel bad for Groupon - what else could possibly go wrong? The only thing that seems left is insolvency.

My spidey senses are tingling that this is some sort of sabotage... too many things are falling apart too quickly.

Shit meet fan.