Thursday, February 09, 2012

Credibility Gap 

Groupon, unlike Facebook, is a company with a credibility gap.  Its report of a fourth quarter loss yesterday didn't help its case.  Analysts have been skeptical for some time about its business premise, citing a number of potential competitors and low barrier to entry.  Groupon has apparently decided to grow big quickly in order to outdistance the pack and that has pushed it into the red.  Amazon.com did the same thing when it launched.  Groupon's challenge is much the same as Amazon's.  It must show a consistent profit to regain support from financial markets.  The longer it remains in a deficit, the harder it will be for the company to build support for its business model.  There isn't much that publicity can do for the company now.  Its best PR is performance.


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