Management: Why Groupon lacks a viable business model
All right, you caught us. We’re actually not making any money. In fact, we are really losing a lot of money.â€
This is the essence of Groupon’s declaration last week that it will remove the controversial accounting metric called Adjusted Consolidated Segment Operating Income (ACSOI) from its financial statements. ACSOI essentially measures Groupon’s profits before subtracting its subscriber-acquisition costs and stock option-based compensation. The metric was an attempt to put a thin veneer of respectability on what are extremely disconcerting profitability numbers for the company. In the first quarter of 2011, Groupon posted a net loss of $113.9 million. Yet, the company reported ASCOI of positive $80.1 million. In most recent quarter, Groupon’s losses continued to mount as it begrudgingly abandoned the ACSOI metric amidst criticism and incredulity from the SEC.