OK Kids - let's roll out a little HR MBA lesson courtesy of hot daily deal/venture capital play Groupon. You don't have any reason to know this, but Groupon is the poster child for the daily deal segment and is growing like gangbusters. Growth that can only be described as "market share capture". Why do we call it that? They're hiring sales people out the wazzo, and in doing so, they've gone from break even to losing 102 million a quarter in 2 Years.
Look up "market share capture" and "market share hiring" in wikipedia and it should have the Groupon logo there. More from TechCrunch:
"Daily deals juggernaut Groupon managed to significantly slash marketing costs last quarter, but its net loss in the second quarter of this year has almost tripled compared to last year as it hired more than 1,000 new employees, according to an SEC filing published this morning. Basically, the company is still growing like gangbustersbut losing money like crazy in the process.
The updated financial details show that Groupon increased revenue from $3.3 million in Q2 2009 to $878 million in the second quarter of 2011, while net income swung from $21,000 for the second quarter of 2009 to a staggering net loss of $102.7 million for the second quarter of 2011.
The reported net loss is in line with the first quarter of 2011 but nearly triple the $36 million loss from Q2 2010. Groupon hired more than 1,000 employees in the 3-month period – growing its sales force to more than 4,800 people – which caused a serious bump in ‘general and administrative expenses’.
In total, Groupon grew from 37 employees as of June 2009 to 9,625 employees as of June 2011.
Groupon serves 175 North American markets and 45 countries as of June 30, 2011. The company accounted for 115.7 million subscribers at the end of the second quarter of 2011 and says over 23 million customers have purchased Groupons through the end of Q2 2011."
But wait! There's more fun and games to the Groupon hiring story. Sure, they're hiring lots of people in a market share drive, but - revenue per merchant and deal size is actually going DOWN. Check out this chart:
Your HR MBA mission: Sell the promise of Groupon but forget to tell your candidates that deal size and revenue per merchant is down. More from Silicon Alley Insider:
"Groupon's business faces significant challenges as competition becomes more intense according to an analysis by Vin Vacanti of deals aggregator Yipit.
Vacanti took a look at the latest S1 numbers on Groupon's Boston business, which is its second oldest market. It's good to look at a mature market like Boston because it could be provide a window into what will happen elsewhere in the world when the competition catches up.
On the face of it, things look good in Boston. The number of subscribers was up for the second quarter of the year versus the first quarter. Revenue was up on a quarter over quarter basis. Featured merchants grew as well.
But beneath these numbers lies a troubling trend, according to Vacanti. Groupons sold per subscriber was down. And revenue per merchant was down as well. These two metrics suggest that Groupon's bottom line is in trouble.
Vacanti summarizes his analysis by saying, "Groupon is spending considerable money to acquire subscribers but those subscribers are buying less Groupons. Groupon is also spending considerable money to acquire merchants but are making less revenue per merchant. That’s not good."
HR MBA lesson: Market share hiring means you don't worry about whether the business can support the people you're hiring. You hire revenue producers knowing that they'll either sell, or by the very nature of sales performance management - they're gone.
It's not your problem. Fingers crossed at Groupon as they hire those 1,000 sales pros based on the numbers above. Go read it again - HR MBA for those who take the time...