Andrew Mason On How To Deal: From Founder To Ex-Groupon CEO

Groupon’s journey from world’s hottest startup to most polarizing company in tech is delicious, disgraceful, and just plain weird. Inside its precipitous fall—and its audacious bid for redemption.

If you've never had caviar from famed New York restaurant Petrossian, you should. As the food critic Ruth Reichl once noted in The New York Times, "Nobody in New York City serves better caviar, and nobody does it with more style." It's delicate, lightly salty, and tastes like heaven. It also tastes very expensive, which it is. But I can attest that it doesn't taste any less heavenly or expensive when you pay half price for it. Last November, I paid $50 to secure a caviar tasting for two at the art deco monument, thanks to a deal that had landed in my inbox from Groupon Reserve.

A few weeks later, my fiance and I began an enjoyable evening sampling caviars and drinking Prosecco from tall glass flutes, as waiters in formal dress hovered over tables quietly adding and removing items. It was a wonderful evening. With alcohol and extras, I probably spent $120.

And I might go back.

If I can get another $50 deal on caviar for two.

Which makes me Groupon's target customer. I am both its opportunity and its problem.

And so is Petrossian.


Two months later, on the last day in January, Groupon cofounder and CEO Andrew Mason walks into the dining room at Madera, a Michelin-starred restaurant in the Rosewood Sand Hill, a luxury hotel in Menlo Park owned by Stanford University, looking as if he just crawled out of bed. He and I are meeting for breakfast at 7:30 a.m., so that may have been the case. (The 32-year-old once experimented with sleeping in his clothes to see if it would allow him to get out of bed later. He immediately deduced that this was a bad idea and terminated the experiment.) In the vast, mostly empty dining room, whose few patrons are men in suits reading newspapers or checking their smartphones, Mason stands out in a brown sweater over a gray T-shirt and jeans.

Groupon cofounder and CEO Andrew Mason faced hostile investors, merchants, and more after having to restate earnings twice.

The company that Mason started in late 2008 now has 41 million active customers, more than 10,000 employees in 48 countries, and 500,000 merchants as partners. Mason is simultaneously alert and exhausted, in the way you would be if you'd been pursued by a bear and turned to find it gone. Physically drained, but twitchy with the knowledge that the predator could reappear at any moment.

And understandably so. Mason had been nearly eaten alive by the market and commentators since filing to go public in June 2011 ("Groupon Is a Straight-Up Ponzi Scheme" blared one blog the day after the company filed.) The fervor only intensified after the IPO the following November. When we met, Groupon's stock was down 72% from its IPO price of $20 a share—and much of the blame was directed at Mason. His personality quirks and lack of prior experience are at odds with Wall Street's platonic ideal of public company CEO: a numbers-driven operator who is experienced, polished, reliably predictable, and predictably reliable. Not the kind of guy who makes jokey yoga videos in his underwear. Or the guy who tries to present New York mayor Michael Bloomberg with a real, live pony, a "GrouPony," to be exact—a move he came to regret, upon learning that the mayor's daughter had recently fallen from a horse. (The GrouPony was then banished to a freight elevator for the duration of the mayor's visit.) Or the guy who creates an entire room in his corporate headquarters for an imaginary tenant named Michael whose belongings include an exercise bike that plays Sade when pedaled, and whose decor features Cheerios boxes and a toilet full of Almond Joy bars. (Yes, Mason was the impresario behind all these stunts.)

At breakfast, Mason is more subdued. He insists that his prankster persona is just a story the media has built up. "I'm weird," he tells me, "but I'm a pretty serious person." Groupon's fourth-quarter earnings announcement is four weeks away. The last quarter had not been so great for him. Around the time I was eating half-price caviar, the Groupon board was meeting to discuss, among other things, whether Mason should be replaced as CEO.

Mason held on until the company's earnings conference call at 4 p.m. Central time on February 27. Mason and his fellow top executives reported quarterly numbers that can only be characterized as disastrous. Revenue was up, but no one expected the company's losses, and first-quarter guidance was far below analyst expectations.

Almost exactly 24 hours later, Mason announced his own firing in a public letter. "If you're wondering why," he wrote, "you haven't been paying attention." He continued, "From controversial metrics in our [initial public offering] . . . to two quarters of missing our own expectations and a stock price that's hovering around one-quarter of our listing price, the events of the last year and a half speak for themselves. As CEO, I am accountable."

Cofounder Eric Lefkofsky and another board member, former AOL executive Ted Leonsis, were named interim co-CEOs. When I sit down with Lefkofsky at Groupon's Chicago headquarters 11 days after Mason's ouster, he pins the blame for the company's woes on Mason's actions as CEO. "You could say, 'Well, everyone was here and everyone's to blame including the senior manager, the board, whatever,'" he tells me. "But at the end of the day, the CEO is the CEO. And he makes those tough calls. If they go well, you're a hero, and if they don't go well, you're accountable."

Groupon's story is more complicated than the bad calls of a callow CEO. It is a cautionary tale for any hot startup that wants to go public, and it is potentially a tale of transformation and opportunity. We've seen the one-time highflier's Icarian downfall. Does Groupon have the potential for a phoenix-like resurrection?

Even before going public, Mason had been aggressively expanding beyond the daily-deal email that everyone knows and either loves or loathes. Groupon offers consumers Groupon Goods, a direct retail business with electronics and fashion products sold via flash sales; Groupon Now, a real-time service that allows users to search for things they want and find relevant offers; and Groupon Getaways, which features travel discounts. For merchants, Groupon has been developing payment and point-of-sale systems that make it easier for them to understand the economics of their businesses and generate demand for their products.

Strategically, this all means that the company is moving from what's known as a demand-fulfillment model (i.e., filling empty seats at a restaurant on a Tuesday during nonpeak hours) to the also delightfully named demand-generation model (if you're hungry and you want sushi, check the Groupon site or app for relevant deals in your area). It means a shift from being a company that "pushes" deals to your inbox to one that "pulls" you into its site or app, where you make a purchase. The company estimates that more than 40% of its transactions now take place on mobile devices.

The management Mason left behind believes these products are integral to Groupon's future. But those execs also told me that no one outside the company really understands what Groupon is anymore. So what is Groupon? And does it have a future?

THE GROUPON YOU KNOW

The Groupon that everyone knows is the one that sends its customers emails offering deals in their area. The daily-deal business is Groupon's original foundation and, for better or worse, the core of its brand. A typical Groupon deal email is distinguished by its absurdist wit. On one for 47% off Versace Man Eau Fraiche Eau de Toilette Spray, the email says, "Perfumer Olivier Cresp conjured this masculine scent in 2006, the year Americans, as one, all realized they had peanuts up their noses." There are occasional novelty deals in keeping with the company's spirit and aesthetic, such as editorial employee Ben Kobold's offer for a $100 bedtime tuck-in. Or the company's bid to name your baby for $1,000. (Read the fine print: All babies will be named "Clembough.")

"I think in the first phase of our company, we were a glorified mailing list," Mason told me over breakfast. "We had a completely unintelligent email that we sent out once a day and we had a human sales force that was going around and procuring the deals." The distinguishing feature of Groupon's headquarters, after all, is not the reception area's giant sculpture of a cat in a spaceship. Nor is it the Astroturf carpeting and giant fake trees that would not look out of place in a child's playroom. It is the office's long rows of packed-in desks manned primarily by the company's army of salespeople, approximately 5,000 strong.

The deals they're selling have no homogeneity. Restaurant deals, cosmetic procedures, and tours seem to form the bulk of local offerings, but the extreme deals are interesting, if only in terms of how broadly the Groupon model might work. "We had one position for a submersible that was going down to the Titanic on its anniversary," head of communications Paul Taaffe tells me. "We've sold cars. We've sold breast implants. But these epic deals are one in a million."

Epic or banal, the daily-deal business is perceived to be in decline. Ask Lefkofsky about this, and he begins by framing the conventional wisdom about Groupon's business. "There's a belief out there that if you send me an email every day, at some point I'm going to get tired of opening it," he says. "And you send me an email every day that's at 50% off, and you've got a margin that's on top of that, at some point merchants are going to get tired of running with you. There's also the sentiment that at some point, people like Google or Amazon or Facebook are going to do this better."

Lefkofsky speaks emphatically and without hesitation, his eyebrows rising behind his glasses on particularly important points he wants to make. His eyebrows are dancing now: "What's interesting is that when you look at the data, none of those things have really played out."

Demand for Groupons, he says, has never been higher. "We sold 50 million Groupons in a quarter for the first time," he says, citing a bright spot in the company's otherwise poor fourth-quarter results. The company also measures the ratio of merchants that choose to run with Groupon again, and Lefkofsky reports that number is more than 50%. "Our customer-satisfaction scores have never been higher."

That is the Groupon everyone knows, and the Groupon that went public 18 months ago. But it's not the Groupon that Mason wanted it to be, or that the current executive team is still working toward.

THE GROUPON THAT GROUPON WANTS TO BE

Mason made two dozen acquisitions in his time as CEO, almost all of them feeding into his vision of Groupon as not just a daily-deal company but what he called an "operating system for local commerce."

The wonky term probably hurt more than it helped, at least in reshaping the public's (and Wall Street's) understanding of Groupon's ambitions. But here's what it means: Groupon wants to sell local businesses the software they need not only to get new customers in the door but also to manage more easily such tasks as inventory and payment processing.

With Mason gone, Jeff Holden, Groupon's SVP for product management, is probably the most influential person driving the direction of Groupon's products. Holden, 45, sold his startup Pelago, which had created a well-regarded location app called Whrrl, to Mason in April 2011. The two bonded during a two-day stay at Holden's house, where Holden says they had "one of those conversations where you see the world exactly the same way."

As it turns out, Holden, who was an Amazon executive before he started Pelago, is able to articulate the vision for a local commerce OS in a way that Mason, at least toward the end, was unable or unwilling to. Holden describes a process where Groupon interacts with the merchant and looks at how much its customers typically spend. Then Groupon tries to figure out a deal that would be profitable for the merchant, and allow it to get enough "return" on the deal to make it worthwhile. And return can be marketing or actual profitability. One of Mason's frustrations was that merchants didn't always understand that return on investment could be viewed as efficient marketing as well as repeat customers.

Holden agrees with Mason, but also wants Groupon to pay off from day one. "We want that first [deal] to be profitable. If that first visit is at least break-even, you've got the best marketing deal in the world: You're spending nothing to acquire customers."

What's particularly compelling to Holden is that Groupon has managed to achieve enough scale that it has what he calls a two-sided market: a critical mass of consumers and a critical mass of merchants that operate symbiotically.

Holden radiates optimism. He liberally peppers his conversation with the word super, which may be his favorite adjective. (The new products are super cool and everything is going super well.) He's more than ready to address the key critiques of how Groupon interacts with merchants on the deals side of the business.

On the charge that Groupon deals can potentially lose merchants money by wiping out their margins, Holden (and Mason and Lefkofsky) insist that Groupon customers actually spend more money at merchants from a Groupon deal than regular customers would, because they spend money above and beyond the cost of the deal. This marginal revenue is referred to as "overspend" and is measured and aggregated into what Groupon calls its "deal impact report," which it distributes to merchants.

One of the more frustrating aspects of reporting on Groupon is that its executives cite examples that apply to restaurants but may not translate to other Groupon merchants. (Groupon likes to use restaurants and bars as test cases for new products and services. The first Groupon was actually for a bar in the Montgomery Ward building that serves as its headquarters.)

It's easy to imagine overspend at a restaurant: Alcohol is rarely included in restaurant-related Groupons. But does anyone really overspend when getting a Groupon bikini wax or Lasik eye surgery? (I'll have two eyes instead of one?)

When there is overspend, Groupon hopes that merchants will see those numbers in their impact reports and gain deeper knowledge of their businesses. But even Mason admitted that local merchants don't always think of Groupons as isolated marketing campaigns; they just want customers coming back.

And that's exactly the problem that Holden wants to solve. "A key priority I had from the day I walked in the door," he says, "was to try to evolve the relationship with the merchant from ephemeral—a one-time thing—to perpetual."

Holden thinks Groupon has the potential to generate demand spontaneously for merchants. If the original deal model was one of discovery—to make customers buy things serendipitously—its evolution is one where the customer knows vaguely what he or she wants and Groupon offers it up. "You know you're hungry and you want to go find a restaurant," Holden says, speaking quickly and energetically.

A customer logs in to the Groupon app, searches restaurants nearby, "and you're probably going to end up going to a place you didn't think of," Holden says.

We're on restaurants again, so I ask whether the same thing works for retail. "It drove a lot of demand for American Apparel," Holden says. "With the right economics, people get super excited." Taaffe, Groupon's communications chief, is even more effusive: "We were the only reason they didn't go into bankruptcy."

On three occasions since late 2010, American Apparel, one of the few national brands with which Groupon has done deals, has offered half-off coupons (e.g., a $25 Groupon is worth $50 in value). "Has Groupon been a great driver of revenue and new customers for us? Absolutely," says American Apparel spokesperson Ryan Holiday. He goes on to note that the company has also done deals with Groupon in several international markets and that the increased revenues from all these deals totaled "a few million." Did Groupon save the company from bankruptcy? Holiday is emphatic: "That's preposterous."

Holden can be dismissive of the need to serve major national accounts. "The opportunity we can create for small merchants is much larger," he says. "They're super underserved." But those deals do more than drive business to a big retailer. They enhance Groupon's relationship with consumers, which is as crucial to the company's success as its facility with merchants.

Holden has a distinct vision for making the experience better for customers, in part by improving the way they redeem their Groupons at the venue. That process can be fraught if the merchant isn't already on board with Groupon's operating system.

At Petrossian, I was greeted at the door by a gray-haired woman who seemed none-too-thrilled when I mentioned that I had a Groupon. She disappeared momentarily, returning with a printout. She proceeded to ask me for my ID, and when I offered to show her the Groupon voucher on my mobile app, she eyeballed it as if she suspected it was something sent from the future specifically to irritate her. She informed me that the restaurant had no way to scan it. My fiance knew that I had gotten a discount on our romantic evening for two, but if it had been a first date, this scene might have been awkward.

This is where Petrossian is also Groupon's challenge. By all accounts—the restaurant cooperated with Groupon for a June 2012 promotional video featuring VP Alexandre Petrossian titled "Building Your Business With Groupon"—the deals portion of the business seems to be working as Groupon envisions it, as cost-
effective marketing, attracting new customers.

But the technology side is a different story. Many local business owners are incapable or unwilling to adopt new technology. For the ones who will, it's often a matter of training them to use it and ensuring that they fully understand what it can do.

Holden wants the process to be seamless. If you're already in Groupon's system and the merchant is using Groupon's operating platform, the merchant knows you've purchased the deal and automatically discounts the bill. You never have to say a word about it.

Which is why Holden is most excited about the technology that lets Groupon do just that.

Seth Harris (top) and Jeff Holden, who sold their startups to Groupon, are now charged with bringing a more sophisticated vision of local commerce to life.

GROUPON'S TECH PLAY

Last May, Mason acquired a New York-based company called Breadcrumb, an iPad-powered point-of-sale system for restaurants and the most fully formed example of what Groupon aspires to do with merchants. "Restaurants are the only business where most of your customers give you their name at the beginning of the [transaction]," says Breadcrumb founder Seth Harris. "You go to the hostess, you give her your name—and we never use it!"

When we meet in San Francisco in late January, Harris and I have lunch at Boulette's Larder in the Ferry Building. The restaurant's mantra—"seasonal country cuisine can fuel the urban hub of life"—is a fair description of many of the restaurants using Breadcrumb right now. They're cosmopolitan (read: big cities), independent, and mid-market prestigious. Their chefs are regionally known, but not quite celebrities. They have all the usual upmarket signifiers—farm-to-table, artisanal, organic. (Molecular gastronomy optional, but mildly encouraged.) In other words, they're not the sort of places you'd think were running their business on Groupon.

Harris is a mid-thirties entrepreneur with spiky hair and a Northeastern accent, a guy who followed the well-worn path of undergrad at Yale, followed by a couple of years consulting at McKinsey, before realizing he needed a change and jumping the track to become what he describes as a restaurant guy. "It's in your blood," Harris says. (This may not be metaphor, given his obvious passion for the prime rib sandwiches from Mario Batali's Eataly and the offerings from the classic sandwich shop Eisenberg's near his primary offices in New York. "The tuna melt there is so good," he says. "So bad for you. But so good!")

After a stint at the nightclub Suede and a managerial position at an Italian fine-dining restaurant in Manhattan, Harris began thinking about that first interaction between restaurant and patron, how he could get feedback once he had the customer's name and deliver a better experience for diners.

Harris concluded that however he captured customer feedback, he needed to integrate it with the restaurant's point-of-sale system, but this proved more challenging than he anticipated. Chances are, you've probably seen a Micros terminal, one of the most popular POS systems: It's a combination cash register, order-routing system, and reporting software housed in a big black box with a touch screen.

Micros terminals are cumbersome, clunky, and very expensive. A Micros contract for a single restaurant can run as much as $30,000 a year, and that doesn't include hardware or the cost of upgrades. The screens function or don't depending on how hard you press. "It's why you always see servers poking it with a pen," Harris says. In past nightlife and restaurant jobs, he used to put a sign above the terminal telling servers not to poke the screen, but they would ignore him and the sign, jam a pen through it, and it would stop working. "Then you'd have to spend thousands to fix it," Harris says.

One day Harris was sitting at Morandi, a popular Keith McNally Italian restaurant in Manhattan's West Village, and he saw a server punching a Micros terminal because it was down. Again. Harris had an iPad on the table, and it dawned on him that instead of trying to integrate with Micros, he should build something better.

His goal with Breadcrumb was to make it so that his wife, who had never worked in a restaurant before, would be able to ring in an order, send it to the kitchen, receive a payment, apply it to the check, print out the check, and never ask Harris how to do it. "Everything was going well until I actually installed a printer in the kitchen and was sending orders to her and she lost her patience," he says. "But we managed to get there, and I also didn't get divorced."

Harris sold Breadcrumb to Groupon, realizing, like others before him, that the company and its massive sales force offered his creation the kind of distribution that he wouldn't get as a small startup. When Groupon acquired it, Breadcrumb's client roster was in the double digits. As of late March, Breadcrumb had 250 installations in U.S. restaurants. Groupon's sales force gives Breadcrumb an entry point into thousands more.

Breadcrumb is the kind of disruptive product that Groupon needs to convince merchants and Wall Street that it's more than just deals. Analysts expect the global market for hardware point-of-sale systems to be almost $31.5 billion next year. Breadcrumb is cheap ($99 a month for one iPad install; $399 for up to 10 with unlimited users), it runs on commodity hardware (with industry standard printers and registers), and upgrades are free.

Let's be clear: 250 installations is a drop in the bucket. But it's a start.

GROUPON'S WALL STREET PROBLEM

When Mason and I met at Madera, it became clear that he was unprepared and unwilling to do what Wall Street asks of a public company CEO. "What's just depressing to me is how—and it's not just for us, let me generalize it—the moment a company goes public the conversation shifts from how it's trying to change the world and the product it's building to how it's making money," he said. "All the coverage around Facebook's new search tool was a little bit about the feature and then it gets immediately into how the market is reacting to it. Like, who the fuck cares?"

Both Mason and Lefkofsky deserve blame for never quite accepting that Groupon needed to conform to the parameters in which Wall Street has always operated, rather than expect it to make an exception for Groupon. This began in the run-up to filing for an IPO when Lefkofsky controversially cashed out $382 million of his equity from almost $1.1 billion raised, an aggressive liquidation that was construed as, among other things, a vote of no-confidence.

And it continued in Groupon's reporting to the SEC. Groupon filed statements that had to be revised because the company used an accounting metric—ACSOI (adjusted consolidated segment operating income)—in its required filings that suggested a net gain in its operating income. Conventional SEC-required metrics would have suggested a loss.

To be fair, ACSOI is an important metric for Groupon internally. It helps the company's management think about long-term costs before it spends money on marketing. And considering that it believes its marketing budget is variable, it's essential for management to know what sort of profits it's looking at without taking marketing into consideration.

But that's not what the SEC asks for. And it's rare that a company blatantly flouts what the SEC wants. "Looking at it in retrospect, like many stupid things that people do, it looks obvious," Mason told me. "But at the time we were in a different world. We were the darlings of the tech world. Everything had gone our way, and we thought, We'll put this metric [ACSOI] in here because we think it's helpful. And people were like, 'We think you put this metric in here because you're evil.'"

He continued, "They were basically like, Here's the list of companies that have made-up metrics and these companies suck. So you probably suck too."

Mason admits that the decision was unsophisticated. "That was us not realizing what we were getting into in going public."

Lefkofsky, 10 days into being interim co-CEO, says, "For whatever reason in the first 12 to 15 months of us being public, we did not do a very good job of controlling the process. It felt very often like the process was controlling us." But he adds, "We did a lot of work this year out of that to make sure we don't have the material weakness designation, to make sure we're now [Sarbanes-Oxley] compliant, to make sure [we have] all the internal controls."

A week before Groupon's fourth-quarter earnings call, Sterne Agee analyst Arvind Bhatia upgraded the stock, setting a price target of $9 a share, almost double Groupon's value at the time. He justified his call on the basis that he liked that Groupon was learning to pull users to its site rather than pushing them there via email; he thought they were making good progress on fixing the international business and that the company was undervalued when compared with its peer group. (Its enterprise value as a ratio of sales was 0.8x, and comparable companies were trading at 3.7x.) However, he noted, "the upgrade was not a call on fourth-quarter results as near-term challenges remain and turnarounds take time."

It was a wise caveat. When the company announced its fourth-quarter financial results on February 27, not only did it miss earnings estimates by $0.12 a share but estimates for the first quarter of 2013 were lower than what the market was hoping for as well, with Groupon projecting revenue between $560 million and $610 million for Q1, well below the expected $650 million.

It's unclear whether Groupon will hit Bhatia's $9 price target, but the stock was up 12.5% the day after Mason was fired. Almost a month later, it's trading at more than $5, or double the stock's all-time low of $2.60.

As I listened to the earnings call, I remembered something Mason said a month earlier at Madera: "I don't know that the market knows it, but they do not want us caring about how they react. They do not want us to think about that. That's the end when companies like ours start paying attention, doing what they want us to do." That was wishful thinking, another flash of the idealism that sunk Mason.

Mason's team appears to have internalized the lesson. I spoke with COO Kal Raman an hour before I sat down with Lefkofsky in mid-March. Raman, another Amazon vet, views local commerce as a social calling—"I'm helping society," he says—and like the other entrepreneur turned Groupon executives I spoke with, he says that if he weren't at Groupon, he'd be building his own company. Raman says that he looks forward to the point at which he doesn't have to issue any commentary during earnings calls, because the numbers would speak for themselves. Conveniently, those kind of direct, transparent, positive numbers are precisely what the market responds well to. And the answer to Groupon's market woes are probably as simple as that.

WHAT IS GROUPON?

Mason and I were well into our breakfast meeting when I asked him if Groupon was becoming a tech company. He protested, as if the question was some sort of accusation. "What does it mean to think of someone as a tech company?" he said. "We don't have a small division working on a space elevator, if that's what you mean." I clarified that I define a tech company as one whose value is primarily defined by its tech-related intellectual property portfolio. Things like Breadcrumb. Things like Groupon Payments.

He softened a bit. "Absolutely," he said. "IP is going to be an important and necessary part of our success. I suppose somebody could ask us, Are we a marketing company? Yes. Are we an e-commerce company? Yes. Are we a technology company? Yes."

Lefkofsky would like people to view Groupon as a tech company, which would certainly be more appealing than a sales-driven, email-based daily-deal company. "I think we are a tech company today," he stresses when we meet. "If you look at the investments we're making in technology, and the sheer head count, technology's at the heart of what we do."

As proof, he points to Groupon's SmartDeals platform, which personalizes offers for users, and its "deal bank" platform, which allows merchants to create and manage ongoing offers. "All of our merchant tools are really sophisticated technology," he says. "It's just a matter of when people outside the company start to realize that we're a technology company. That I can't control."

It's hard to ignore that the company is still heavily dependent on revenue from deals and that the company's leadership is very protective of that business. Whenever the conversation with any Groupon executive veered in the direction of the public's and merchants' flagging appetite for deals, I would get a full-throated defense in reply. Excuses for any weakness in deals would be pinned on the preponderance of Groupon clones, or in the case of its troubled international business, which accounts for 41% of revenue, Europe's macroeconomic woes, or the incomplete rollout of Groupon's "North American Playbook."

Yet one can only get so many deals in one's inbox. (One Lasik surgery will do, thanks.) And that's assuming you get them at all. I signed up for Groupon fairly early on and I receive the emails sporadically: Either they're only emailed to me every 48 days or so or, more likely, they're going into my Gmail spam filter. (Which seems like karma of a sort for Groupon's 2010 rejection of Google's $6 billion acquisition offer.)
Raise this issue, though, and Groupon execs aren't worried. "These things tend to be pretty slow moving," Holden says. "When I was at Amazon in 2002, we thought email was going to die as a channel every day. It's been 10 years."

Groupon is, in fact, now several businesses, and its execs like to point to Amazon as a natural analogue for the company they're building. The parallels are intriguing, particularly when you consider how many of its former executives now work at Groupon. ("It just ended up that way," Mason told me. "The culture that I was trying to build ended up being a good fit for the values that resonated with Amazon people.") They know how to be entrepreneurial but aren't strangers to large-company growing pains or frighteningly low stock prices. Lefkofsky points out that Amazon's roots were in books, but it successfully extended into lines that were interesting to its customers. Left out from this conversation is Wall Street's concern that Groupon, with offerings such as Groupon Goods—which have drastically lower margins than deals—may be following the Amazon model a bit too closely.

Groupon would do well to adopt its plainspoken approach to corporate communications, best exemplified by Mason's announcement that he was leaving the company, in which he wrote, "I've decided that I'd like to spend more time with my family. Just kidding—I was fired today"—in its financial reporting. The company breaks out revenue at the top level but won't go into specifics of which business lines are responsible for what ratio of revenue. "We can't disclose that" is a popular refrain. Some of Groupon's new products seem very promising, but it's not clear how much of the overall business they're expected to occupy. Several products, such as Payments, only launched last fall, and the company won't reveal what sort of market traction they're getting. When I ask, I'm told that it's "too early to tell." Without any effort to guide the perception away from deals, Wall Street, merchants, and consumers are left with a business they believe is on the wrong side of a marketing fad.

GROUPON'S FORTUNE OR GROUPON'S FOLLY?

Thinking back to Petrossian, I can imagine the ultimate expression of the Groupon experience, as conceived by Mason, Holden, and all the other entrepreneurial types roaming around the company. It goes something like this: I receive an offer for a caviar tasting for two for $50. The tasting is worth $100. Groupon sells Petrossian on the deal, which the merchant hopes will bring in new customers who will overspend by a nice percentage and fill seats during a low-demand period—maybe weekday early evenings, as predicted by Groupon's yield management software. Petrossian has seen this work before and is happy with its return on investment, as measured by the Groupon system's "deal impact report," which uses all of the above data to demonstrate that the restaurant has made more money off of Groupon customers and that they return more frequently than the restaurant's usual patrons. A few other customers are coming in with Groupons as well: They were in the neighborhood looking for somewhere to eat and found Petrossian by clicking the "nearby" option on the Groupon app. While they were at it, they clicked on the app's Goods tab out of curiosity and bought a MangoDrin weight-loss supplement for $10.99 (regularly $50), perhaps anticipating the ramifications of the meal ahead.

I arrive having purchased a Groupon, but never have to mention it because Petrossian is using Groupon's payment system and Breadcrumb at point of sale, aided by some tender loving care from Groupon's Hospitality Success Associates. We each order two expensive glasses of Champagne in addition to the $50 I already spent on caviar, and the waiter takes the order at the table, entering it directly into his iPad, thereby transmitting the order to both the kitchen and the bar. All of this is intuitive to the waiter, and he is not jabbing the iPad screen with his pen. My credit card information is already in the system, the discount has already been accounted for, and in the best of all worlds, I don't even have to ask for or sign the check.

My fiance, who knows nothing of the Groupon at all, is impressed with my romantic gesture and exquisite taste in luxury seafood. And Groupon, having ascertained from my activity on the site and my smartphone and my responses to deal emails that I am nutritionally sustained entirely by booze and expensive snacks, sends me a perfectly targeted email for an organic-wine-and-jamon-iberico tasting in Brooklyn, New York, which I will later pass off to my fiance as "this thing I just found."

There's a GrouPony in there somewhere, if only they can find it.

[Photos by Reinhard Hunger; Saverio Truglia (Mason)]

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