"Our main focus is trying to figure out how this model evolves and not consistently falling on our face in the public," Groupon Executive Chairman Eric Lefkofsky reportedly told a Northbrook Chamber of Commerce audience early last April after yet another stumble under his fellow co-founder, Chief Executive Andrew Mason. "It's like giving a 7-year-old a Ferrari; you're going to get a certain amount of chaos."
And yet it took another 11 chaotic months — and still more face plants — for Lefkofsky to finally snatch the keys from Mason.
"If you're wondering why," Mason wrote of his Thursday firing in a memo ostensibly to employees, "you haven't been paying attention."
But attention to detail and adult supervision were not exactly the hallmarks of Groupon under Mason or, for that matter, Lefkofsky, who along with Vice Chairman Ted Leonsis, a former top executive at AOL, will assume Mason's role until a new CEO is installed.
Groupon, after all, introduced itself to many Americans through a tin-eared 2011 Super Bowl ad with Mason-approved satire that many would-be customers found more offensive than endearing. Mason then argued that the audience simply did not know the company well enough to appreciate its humor. That was classic.
Then there was the unsuccessful attempt to introduce a whole new accounting metric to entice investors in advance of going public. When critics questioned the viability of its daily deals business, Lefkofsky declared the company would be "wildly profitable" and Mason defended Groupon in an immediately leaked employee memo. Both actions ran up against Securities and Exchange Commission restrictions on touting initial public offerings.
Subsequent blunders for the Chicago-based global company included an admission of "material weakness in its internal controls" in that its accounting projections had proved unreliable. The company's value plummeted. And its daily deals business, originally hailed as a new way for local businesses to market themselves in the wired world of the 21st century, gave way to old-fashioned peddling of an inventory of marked-down goods and services.
"From controversial metrics in our (the first version of the company's pre-IPO filing) to our material weakness to two quarters of missing our own expectations and a stock price that's hovering around one quarter of our listing price, the events of the last year and a half speak for themselves," Mason wrote in his exit memo. "As CEO, I am accountable."
About time someone was.
Mason's brainchild, lauded by Forbes as the fastest-growing company ever in 2010, is well on its way to becoming yet another cautionary tale, perhaps several of them.
What happens when an entrepreneur who may be a genius in his own realm must learn to be a CEO on the fly? What happens when initial public offering investors can't separate buzz from real business benchmarks? What happens when traditional management methods, accounting standards and other orthodoxy are tossed aside in the name of invention and innovation?
Here's one more: Should anyone have been scared off when Lefkofsky, Mason and others took many millions of dollars out of the company in a pre-IPO round of financing?
Mason didn't think so, although he conceded that "obviously Eric and I weren't cashing out to be altruistic," in Chicago journalist Frank Sennett's book, "Groupon's Biggest Deal Ever." Mason cited the value of bringing in new big-money investors as a kind of endorsement of the company's prospects in advance of going public, and those investors readily accepted that rationale.
"If we're screwing someone, we're screwing really sophisticated investors, the most sophisticated investors in the world," Mason explained to Sennett.
The company Mason leaves only marginally resembles the one he created, and he's no longer the young upstart he projected himself as when he created it. Even if he is still just 32.
As Wall Street seemed to demand, Mason tried to channel Intel's Andy Grove more than performance artist Andy Kaufman. He downplayed his idiosyncrasies and eagerness to flout convention along with his casual attire in a bid to give off a more thoughtful, buttoned-down vibe. But suits don't make the manager, and the young company's growing pains would have proved challenging even for someone with the executive experience Mason never pretended to have.
A rumor floated last year suggested Mason's job was on the line, but that crisis passed and the share price rebounded some after a new outside investor appeared. It turned out that the rally was short-lived. The latest round of disappointing quarterly results, announced Wednesday, greased both a steep share-price slide and, ultimately, Mason's ouster.
On the Wednesday analyst call that failed to stop the decline, Mason acknowledged the changes almost wistfully. "It's hard to believe that just a short time ago we were a deal-a-day business," he said.
It's hard to believe Groupon isn't yet 5 years old and already in the throes of an identity crisis. Mason has compared trying to manage the company to holding on to the tail of a rocket. If lax management led to an erratic trajectory, a stronger hand might have slowed its ascent.
Whatever one thinks of Mason's stewardship, he still created a company with a market value of nearly $3 billion. Unfortunately, Google offered $6 billion for the company a little more than two years ago.
That's not the kind of discount for which Groupon can afford to be known.
Twitter @phil_rosenthal
