News Groupon Dismisses Chief After a Dismal Quarter

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Groupon Dismisses Chief After a Dismal Quarter
Mar 1st 2013, 02:29

Andrew Mason, the irreverent programmer and musician who turned a failed social action site into the daily deals phenomenon Groupon, was dismissed Thursday as chief executive.

Andrew Mason wrote a humorous goodbye letter to colleagues that circulated on Twitter.

A day earlier, Groupon reported weak fourth- quarter earnings, which caused investors to shave off a quarter of the Chicago company's value. The news about Mr. Mason, released after the market closed, sent shares up more than 4 percent in late trading.

In a note to Groupon employees that was typical of his sassy style, Mr. Mason wrote: "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."

He added, "If you're wondering why ... you haven't been paying attention."

Groupon said in its earnings call that first-quarter revenue would be about 10 percent lower than analysts were expecting, among other disappointments.

Jordan Rohan, an analyst with Stifel, Nicolaus, said Mr. Mason's exit "was long overdue."

"I view Mason as a visionary idea generator," Mr. Rohan said. "Few would argue with how impressive the Groupon organization was as it grew. However, at some point it became the overgrown toddler of the Internet — operationally clumsy, not quite ready to make adult decisions."

Mr. Mason, who dodged a potential dismissal in November, will be temporarily replaced by Eric Lefkofsky, Groupon's executive chairman, and Theodore J. Leonsis, its vice chairman, while they search for a replacement.

Now 32, Mr. Mason had a wild ride. Unlike many Silicon Valley entrepreneurs, he never seemed to dream about building a huge company or even becoming fantastically wealthy. Groupon was an outgrowth of a start-up, the Point, which was aimed at encouraging charitable actions by groups. In late 2008, Mr. Mason and a few colleagues reformulated it as a deals shop.

Over the years, Silicon Valley start-ups had tried many forms of deal sites, but Groupon was the first to really make it work, and did so instantly. The formula was simple and compelling. People were sent e-mails of offers for, say, a local restaurant. If they bought it, they got a bargain, Groupon got a commission and the restaurant won new patrons.

In two years, Mr. Mason was turning down a reported $6 billion offer from Google. As a reminder that fate is fickle, he put in the reception area of Groupon's offices a gallery of framed magazine covers featuring Napster, Myspace and other tech wunderkinds that ultimately faded. To these losers, he then added a cover that featured Groupon.

"Our marketing guy thought we should put some press on the wall, but I didn't want an atmosphere of popping the Champagne," Mr. Mason told Chicago Time Out in 2010. "We still have a mountain to climb, and other iconic companies will be a footnote in history."

Groupon's public offering, in late 2011, valued the company at $16.5 billion. It was the most talked-about tech debut between Google and Facebook. The actors, stand-up comics and other creative types who made up much of Groupon's early team watched in wonder. The company had a loose, informal style, with an editorial team as large as a midsize newspaper. Writers labored over the gags that introduced the deals. The one for a dentist started like this: "The Tooth Fairy is a burglarizing fetishist specializing in black-market ivory trade, and she must be stopped."

But then the competition intensified, the criticism began and the stock struggled. Groupon's market value is now $2.97 billion.

Groupon has 10,000 employees in 48 countries. Mr. Rohan, the analyst, said the new chief executive "will have to refocus the company on the most productive markets with the most productive sales people." He added, "Groupon needs to give up on the grand vision of becoming an operating system for local commerce and instead be the best daily deals provider it can be."

Even as the daily deals sites struggle financially — the No. 2 company, Amazon-backed LivingSocial, is in worse shape than Groupon — the number of digital coupon users in the United States continues to rise, according to eMarketer. An estimated 92.5 million Americans redeemed a digital coupon in 2012, up 4.9 percent from 88.2 million in 2011.

No surprise there, said Sucharita Mulpuru, an e-commerce analyst with Forrester Research. "Who doesn't like 50 percent off something? The question was always how you create good consistent deal flow from merchants."

She noted that in his letter, Mr. Mason talked about what was best for the customer. "They think their customer is Joe Smith who buys the Groupon," Ms. Mulpuru said. "But the customer is the merchant. They have been focusing on the wrong person."

Indeed, merchants got a lot of attention for complaining how successful deals came close to ruining them.

Mr. Mason's letter was in the blunt tech tradition of a former Yahoo chief executive, Carol Bartz, who sent an e-mail to the search engine's employees in September 2011 saying, "I've just been fired."

In his letter, Mr. Mason wrote: "I'm o.k. with having failed at this part of the journey. If Groupon was Battletoads, it would be like I made it all the way to the Terra Tubes without dying on my first-ever play-through." He added that he was looking for a good fat camp to lose the 40 pounds he had gained at Groupon.

Mr. Mason's letter was very well received on Twitter, with people applauding his honesty as much as his sense of humor.

Mr. Mason himself retweeted a comment that said: "First the pope and now Andrew Mason!?! Our esteemed leaders are falling like flies."

A version of this article appeared in print on March 1, 2013, on page B1 of the New York edition with the headline: Groupon Dismisses Chief After a Dismal Quarter.

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