Blog

Daily Deal Dilemma: Does Groupon Need a Refund, a Reboot, a Stern Reprimand or Just a Little Maturing?

Apr 27, 2012

The answer depends on whom you ask. If you ask Groupon CEO Andrew Mason, 31, he’s likely to say the latter.

But before we get to Mason, let’s recap.

Back in February 2012, I wrote about how Groupon, the daily deals “Mecca” was launching a PR blitz to help rewrite its then recently soiled reputation after a slew of communication missteps:  a fumbled Super Bowl ad and a case of fuzzy earnings math just prior to its November 2011 IPO.  It revamped its website and added the public relations might of Paul Taaffe, the former chairman and CEO of Hill & Knowlton. (For history buffs, that’s the 85-year-old Manhattan-headquartered PR agency once known for its support of Big Tobacco and its infamous “A Frank Statement to Cigarette Smokers,” 1954 newspaper ad, that claimed the “statistics purporting to link cigarette smoking with [lung cancer] could apply with equal force to any one of many other aspects of modern life.”  Gotta love this industry!)

In that earlier post I puffed on about the tough job that Taaffe had ahead of him, referring to the journey as a “rocky road” while going on to say that, “taming the daily deal beast just doesn’t seem like a job anyone should embrace,” and that “public relations leaders can only craft a message so far. Too much spin and a message – and a company – can spin out of control. Let’s see what happens next.”

And (nearly) spin out of control it has.

Earlier this month it was reported that the Securities and Exchange Commission had begun a preliminary investigation into Groupon’s questionable financial accounting practices after the company announced that it was revising its 2011Q4 earnings, cutting it by $14.3 million to $492.2 million from $506.5 million. The announcement left many Groupon naysayers crying, “I told you so,” while investors are jumping ship in search of…. better deals.

Fast forward a few weeks since the troubling news and Groupon’s stock slide continues. On Thursday April 26, 2012, Groupon’s stock price was nearing bargain-basement levels, trading at $12.06 a share, after its $20 a share opening in November and its 52-week high of $31.44. The reason for the downward revision? Groupon hadn’t set enough money aside for customer refunds.

So in light of all this communications turmoil, one would expect that Paul Taaffe and his team would be out in full force defense and crisis mitigation mode.  To date, however, Taaffe’s strongest defense was when he told reporters: “Every three months Groupon is a different company.”

Somehow I don’t think that’s what investors wanted to hear.

But to give credit where it’s due, Groupon CEO Andrew Mason at an informal town hall meeting on Wednesday admitted his company no longer has “any margin for error,” adding that Groupon is “still this toddler in a grown man’s body in many ways.” In helping the company grow up, the company has announced plans to bring on board additional senior management, and according to a recent Wall Street Journal article, at least two new board members – all designed to show that the company can mature, mature quickly and rebuild investor confidence.

As a public relations professional, one of the most important pieces of advice I can give is telling clients to be up front about their actions and intentions and if there’s no substance behind a marketing campaign, then there’s no point selling the message.

Frank town hall meetings that get section-front coverage in the Wall Street Journal (check out Marketplace in the print edition) is probably not enough to quell all investor fears. But as Groupon closes out another challenging month and is only two and a half weeks away from its next quarterly earnings report, it’s nice to see a maturing response.

Perhaps then – and in an ironic way – Paul Taaffe was on to something after all. Just maybe, Groupon is beginning to change. And just maybe this change is here to stay and the company will not be something different three months from now.

We’ll have to wait and see.

Contact Us

Sign up for our insights on the convergence of business and PR