James Ashton: Groupon a bargain? No, it's just another dot.com cock-up

Outlook It's just the sort of bargain lucky punters might root out on a discount website. Once on sale for $20, now going cheap for $6. Quick – where do I enter my credit card details?

Yet Groupon, the website that promises to offer the best daily deals in town – as long as you are desperate to get your teeth whitened or go on a spa break – represents anything but a once-in-a-lifetime opportunity. At this price, its shares have slumped 70 per cent since they floated with much fanfare last November.

Groupon executives are pegging their woes on the weak economy on this side of the Atlantic. True, the business is growing at half the rate of North America in Europe. But the economy is really only part of Groupon's problem.

More challenging is rebounding from a stinking report from the Office of Fair Trading. Only a few months ago, the website was forced to clean up its act after a string of complaints about misleading advertising and unfair practices such as exaggerating reductions and failing to warn companies of how many customers they should reasonably expect.

In a far-from-grovelling recent interview, its founder Andrew Mason said such cock-ups were all part of the "journey to becoming a great company" and it wasn't all Groupon's fault because it is reliant on the local businesses and the customers it sits between.

How wrong can you be? In this instance, growing pains are just an excuse for slack management and poor attention to detail. If you are prepared to flog your company for billions to outside investors, it should have better controls than this. If it spent as much on compliance as it did on public relations, it might not have got itself into so much bother in the first place.

Prospective shareholders should have seen warning lights flashing a year ago when Groupon was forced to restate its accounts to exclude the fees it pays to merchants.

The dot.com class of 2012 had a great chance to take the best of Silicon Valley on to Wall Street. Taking the underwhelming flotations of Facebook and Zynga into account, they failed.

True, they have arrived, only for their half-baked business models and over-promotion by eager investment bankers poisoning the pool for all that follows. They enriched themselves and enraged Wall Street in the process. What a bargain.

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