Matt Spiegel is perhaps best known for starting Resolution Media, which he led for more than four years before selling to Omnicom Group. Since then he’s held several positions at the global advertising and marketing company, including CEO of its media digital group.

Spiegel begins today as the CEO at Tap.me, which is building an ad network focused on monetizing games. It is starting with mobile applications and then will move to other platforms, like Facebook.

The founding team, which is made up of former game developers, including CEO Joshua Hernandez, recognized the need for a better ad platform.

“What they witnessed in the game space is that most ads interrupted the game play and were not very effective,” Spiegel said.

The ads were either banners that were ignored during game play, or were premium sponsorships, which consisted of integrated product placements. The latter was more effective, but time consuming and not easily scalable.

Despite the downfalls, games continue to be the most downloaded applications. “We’ve reached a tipping point, where the consumer attention and time spent on games has gotten to the point where brands should look at it as a content channel,” Spiegel said.

So, in essence, the company believes that ads should not interrupt the game play, but that they can be shown before the game.

It works like this: A game developer picks something in its game that can be sponsored, such as being able to jump higher, access to a virtual good, gaining more speed or endurance, or being able to unlock a new level. Tap.me then provides advertisers that will sponsor those items, like Red Bull or Gatorade. Players have the choice of playing with or without the advertisements.

Because many of the ad units are for similar actions or items, the market can reach scale, unlike customized sponsorships, like a car company providing a free tractor in a farming game.

So far, the company has more than 35 games signed up on Apple and Android and recently hit two million uniques on the Tap.Me platform. Some games include: Hospital Havok 2, Escape 3D: Bathroom 2, Drake’s Tower, Charmed and Mr. Runner.

Hernandez said so far most of the players, or 88 percent, opt in for the advertisements and are choosing to interact with the brand. He said the sponsorships also result in longer game play, and that the users who did pick to see the ads spent 63 percent more time in the game than players who did not.

Tap.me was originally founded in 2009 as a game company, but after seeing the challenges with in-game advertising, it shifted its focus in 2010 to advertising. The 15-employee company has raised $1.44 million from angel investors and two Chicago VCs, I2A Fund and Hyde Park Angels.

Now with Spiegel on board, the company plans to raise more capital and accelerate the number of advertisers and game makers it has on board.

Arriving at Silicon Valley’s Computer History Museum, in the heart of the tech industry, with the leader of the free world talking jobs and digital, you might expect fantastic wireless access.

You might, but not so much if you are a “local” reporter and can’t jack into the extra-secret-special wireless link the national White House press corps apparently has reserved for itself. (They also get a lovely noshing buffet, whilst we tech reporters have been instructed not to touch the pineapple and scones or else!)

Famished for coffee and carbs, we’re left with glomming onto the museum’s slowish wireless service — there are lotsa geeks here today jamming up the lines — and every now and then getting some juice from Google. The search giant blankets the Mountain View, Calif. area near its HQ with free Wi-Fi, but it fades in and out.

I am now reconsidering the antitrust investigations that the Obama administration is conducting against Google, as long as its signal is good enough to check Twitter.

So this liveblog of President Barack Obama’s LinkedIn Town Hall — which will center on jobs and is titled, “Putting America Back to Work” — could be glacial with not much news, much like what I am expecting from the event itself.

I’d certainly like to work, as long as the wireless does! (Plus, limited power outlets in the room, so it’s every reporter for herself!)

But bygones, while we await the Prez!

10:18 am: One thing that made me flee Washington, D.C., when I worked for the Washington Post, was all the rigmarole that surrounded the appearance of and access to politicians.

I get it, the security and all, and am all for it on a general safety level. But, no matter how you slice it, it hinders any kind of movement or genuine interaction, like being stuck at a really dull opera. All the world’s a stage and we are all merely waiting in traffic.

In contrast, and one of the joys of Silicon Valley, is that anyone can get up right up into the grill of the various billionaire potentates littering the landscape, engage in a debate and get a possibly real answer.

Thus, I am hoping for a lot here from LinkedIn CEO Jeff Weiner, who is going to moderate the hour-long session with the President.

By the way, while he is busy running the business-focused social networking site, Weiner is looking good in a fancy suit, almost as if he could be Secretary of the Internet. I’d vote for him.

10:28 am: Some painless but hip music is playing now, as we wait, wait, wait for Obama, who is set to begin in 30 minutes.

I wonder if the President is ever early. Wouldn’t that freak the peeps out?

(Obviously, I am bored, so I shall now go monitor Twitter to catch up on the latest in the new bad-marriage-or-not cat fight between Brad Pitt and his ex, Jennifer Aniston — as if we need him to tell us Angelina Jolie is more interesting. Frankly, Angie’s midday snack is more interesting than Jen.)

There is now what appears to be a Secret Service dude next to me, giving me a hairy eyeball. If I am jailed over my wireless protest, please give generously to my defense fund.

Free the Internet! Free the Internet!

10:35 am: Finally, the production guy is up giving out the rules. Turn off the cellphones, no making noise.

The head Secret Service guy then takes the stage. No getting out of your seat. No sudden movements. And no crossing the blue line in the front row.

“All joking aside,” he says, he will take you down. He also notes that if the President moves toward you to shake your hand, “do not move toward him.”

I love Secret Service agents — especially when played by Clint Eastwood — and wish I had one to give a few people in tech a little smackadoo on my behalf. And not only if they moved toward me!

10:47 am: This little frisson of excitement is followed by more waiting, as the final seats are filled up in the room, which is an unusually (and welcome) multi-racial and gender-balanced crowd for Silicon Valley.

Various White House aides skitter back and forth like nervous ground squirrels — I would imagine their life is one big effort to avoid any gaffe — so the Prez must be near.

I am actually looking forward to seeing him, as I never have in person and am looking forward to seeing the famous Obama charm and techie cred.

Indeed, he is probably the most fast-forward tech president there has ever been. That said, buffeted by more serious issues facing the nation, his administration has delivered on few — by which I mean none — of its promises around the digitization of the U.S.

Our high-speed broadband, for example, is still woefully slow, inordinately expensive and not easily available nationwide.

And I will not even go into the need for increased focus on math and science education or the importance of our broken visa policies.

But the topic today is jobs, which is an arena where Silicon Valley and tech shines in the U.S., even as manufacturing of it has mostly moved overseas. How tech can help improve in the creation of jobs will be issue No. 1 here.

10:55 am: Total silence with five minutes to go. I need the President around to quiet my kids.

Now, LinkedIn Chairman and VC Reid Hoffman comes in, so the event is probably about to begin.

And, indeed, Weiner emerges to cheers, to give a little speech on “changing the way we work … and connecting talent to opportunity.”

11:01 am: Then, the session starts right on time with President Obama.

He begins with a rote speech on jobs, which is nonetheless the most important issue he faces going into next year’s election.

11:14 am: Ah, wireless glitch! Back!

President Obama is inexplicably in the middle of a Medicare question, which gives him an opportunity to talk about the need for the rich to pay more taxes.

And pass his American Jobs Act, of course.

11:17 am: More on proposing legislation for retraining workers, such as the questioner’s mom.

Now to a group of email questions. The first is about when small businesses are going to get a break from onerous regulations and taxes.

President Obama says since he has been in office, he has cut taxes 16 times for those who create a business.

But he is not going to apologize for some regulations, such as those for the financial industry over the mortgage crisis.

“There are some regulations that have outlived their usefulness,” he says, but others not so much.

11:24 am: The next question is from a Chicago IT employee. Except she is not employed.

She is asking a question about keeping her skills up and what programs are needed.

“The best thing we can do for you is that the unemployment rate goes down,” said President Obama, but also adds that making it easy to go to school while waiting on a job is also important.

“Just looking at you, I can tell you are going to do great,” he tells her in an awkward effort at reassurance.

Thanks, Barack, but she needs a job!

11:28 am: A veteran is asking a question about transitioning out of the military.

Obama launches into a story of a medical technician who faced all kinds of experiences, but had to start over again with new classes when out of the military. He suggests some level of credentialing based on experience.

11:33 am: Obama gets to pick out someone from the crowd and manages to pick out a dude who is a former Googler — although he only says that he works down the street — and is out of work by choice.

He asks: “Will you please raise my taxes?

A plant? I wish!

President Obama asks the name of the start-up. “A search engine,” says the ex-Googler-in-disguise, who is Doug Edwards, an early marketing exec there who actually wrote a book on being an ex-Googler.

“That worked out well for you,” kids President Obama.

Everyone likes a rich-guy joke!

He is soon onto the idea that we’re all dang lucky and declares he does not want it to turn the debate over taxes into a rich-poor war.

Bottom line, he notes that we have to raise taxes on the very wealthy. Frankly, if we raised taxes on a bunch of folks in this room, it would help a lot.

11:42 am: A teach-training question, especially math and science teachers.

President Obama is all for it.

He is meaning well here, but all he seems to offer is a lot of bromides about the importance of education and errant related anecdotes.

Like one from IBM, where the company hires the kids in the program at the end.

President Obama wants students to see a direct connection between learning and jobs.

Then, he kind of says it again. Gosh, he can talk. How does the well-fed and wirelessly connected White House press corp take it? Lotsa donuts, I would imagine.

President Obama also wants us to turn off the electronics and video games for kids, too, thereby instantly losing the votes of my two sons!

Another laid-off guy is up at the mic. He had 22 years in IT management and is disheartened.

He wants a statement of encouragement from the CEO of America.

President Obama assures him that his track record of success gives him a leg up, but that the problem is the economy and the global meltdown, too.

It’s systemic, apparently.

“The problem is not you, the problem is the economy as a whole,” says President Obama.

That was the last question. Weiner, who has been sitting quietly (I know it was hard, Jeff, but good job), thanks the President and tells him that this is a big issue.

President does his thanks, too, for being able to speak, although not really that much was actually said.

And then a genuine moment, finally, of clarity.

“Look, we’re going through a very tough time, but we have gone through tougher times before,” he says. “But the trajectory we are going on is one that is more open, more linked …”

He talks about the need for being ready to take advantage of that opportunity.

“Things have gotten so ideologically driven, putting party above country,” he adds, that nothing is getting done. That’s why the people, the voters, have to demand leadership from their elected officials.

Or, presumably, fire them and let them try to find another job, too.

It might turn out to be the best idea yet, if these pols don’t agree on something and quick.

Groupon amended its public offering documents today, in a new filing with government regulators, in which it once again changed its accounting treatment.

That includes the way it measures revenue, which will now be reported excluding the money it pays out to merchants.

Some felt the “gross revenue” figure — a term for what are actually gross billings — was not reflective of Groupon’s true performance. It will now use net revenue.

Said the company in the current amended filing, its third:

“We consistently have stated that the amount we retain — rather than bill or collect — from the sale of Groupons is the key measure of the value we create. This change in presentation is consistent with that belief.”

Okkkkaaaay, whatever you say, but the change was requested by the Securities and Exchange Commission.

In its second amended filing, Groupon dropped its controversial “Adjusted Consolidated Segment Operating Income,” or ACSOI, metric, which excluded key marketing costs.

In its first amended filing, it told investors to ignore statements made by its Chairman Eric Lefkofsky and also made more accounting clarifications.

In the current changes, Groupon also posted the controversial letter to employees — first published here — that CEO and co-founder Andrew Mason wrote to strike back at the Chicago-based social buying network’s critics. Many felt the missive violated the quiet period before an IPO that companies are required to maintain.

And Groupon has been anything but quiet, as it advances and retreats to its Wall Street road show, which has been delayed and then not delayed (and might still be delayed, but who knows?).

Also today in its noisy goat rodeo: COO Margo Georgiadis is headed back to Google after arriving in April.

I guess things did not work out.

Lastly, the new filing also has added a new metric for “cumulative repeat customers,” showcasing how many customers have bought a Groupon offering more than once. That number is over 12 million.

Here is the full new S-1 filing to peruse and pick apart:

GRPN-20110923-S1A-0

In a blog it just posted, Groupon said its recently hired COO, Margo Georgiadis, “has decided to return to Google (her former employer) in a new role as President, Americas.”

She was only hired in April, just months before the company filed to go public. Georgiadis was previously VP of Global Sales at Google.

(Interesting way to get a better title at the search giant, Margo!)

Georgiadis was in charge of the company’s global sales, marketing and operations at the Chicago-based social buying service.

Sources said that the hiring did not gel on either side.

It might not be Georgiadis’ fault. She replaced Rob Solomon, who was in his job for one year.

And here’s another: PR hire Brad Williams, a longtime Silicon Valley communications exec, who was there and then gone in what felt like 23 minutes.

It seems Groupon does not like Silicon Valley types or, perhaps, vice versa.

Since its IPO filing, in fact, it feels as if it has been a non-stop circus disaster at Groupon.

That has included immense controversy about its sketchy accounting, huge slugs of venture funding going to its founders and a lot of worries about its growth.

Today, in a Friday late afternoon dumping of bad news in hopes that no one notices (I do), Groupon also amended its S-1 public offering filing once again to change revenue metrics and also add a controversial internal letter that CEO and co-founder Andrew Mason sent to employees to counter its many and growing critics.

There appear to be many more shoes dropping soon, said sources, so stay tuned.

Until then, here’s the whole and very terse — for Mason — post:

Update on the Groupon Team

As a fast-growing company, we’ve done a lot of hiring this year, including on our senior executive team. Since the beginning of this year, we’ve made a total of 8 additions — that’s 57% of the total executive team. It would have been great if I could say that we batted 1,000%, but that’s rarely the case; after five months at Groupon, Margo Georgiadis, our COO, has decided to return to Google (her former employer) in a new role as President, Americas.

We’ve built a fantastic team that has proven itself highly capable, so this change won’t have an impact on operations. In fact, we are using it as an opportunity to reorganize in a way that reflects our evolving strategic priorities. Sales, Channels, International, and Marketing will now report directly to me.

Here’s a note from Margo: “Groupon is a great company and I feel privileged to have worked there even for a short time. It was a hard decision to leave as the company is on a terrific path. I have complete confidence in the team’s ability to realize its mission.” We wish her well.

And that’s why some are wondering if — especially given the still dicey economic situation and the continued turmoil in the markets — the Chicago-based social buying company might delay or even pull its IPO.

Not so. Yet, at least. But that could change quickly.

Several sources close to the situation said that while Groupon’s management and board have not ruled out such a scenario, they will not make any determination about such a drastic move until after the landscape becomes clearer and also after the summer is officially over tomorrow.

“Clearly, the markets are much different than when Groupon started this public offering process,” said one person who is familiar with the internal debate within the company. “But no one can get a real sense of whether it gets better or worse for the next few weeks — that’s where the real questions begin.”

It’s not a bad thing for Groupon to be asking.

While gaming start-up Zynga, in comparison, ferrets away quietly on its way to an IPO, Groupon has been getting a daily smackdown on one of the many issues that seem to have captured the — mostly negative — attention of investors and the media.

Among the topics most mentioned: Groupon’s controversial accounting called ACSOI, or adjusted consolidated segment operating income; questions about its growth prospect in more mature markets; worries about whether the company can cut its marketing costs and still retain customers; and whether it will garner the giant valuations, once upward of $15 billion, that have been bandied about.

Aside from defending itself in a recent email sent to employees from its CEO Andrew Mason, Groupon cannot give complete public answers to these questions until after its IPO, due to regulatory rules.

While Mason’s damn-the-torpedoes missive seemed to be trying to communicate a strong confidence in the company, it’s clear that all the attacks on the company have become frustrating for him.

His internal communication, which was published here first, has also attracted more controversy, and some have suggested it violates regulatory rules.

So far, although it seems likely, the Securities and Exchange Commission has not commented on the email.

To: Everyone

Re: The Memo

There was a whole lot of hubbub last week about an internal email that Groupon’s CEO and co-founder Andrew Mason sent out to the employees of the Chicago-based social buying company, which AllThingsD got hold of and published.

A lot of the noise centered less around the content of the memo — which sought to answer back at Groupon’s growing chorus of ever-noisier critics, who have been relentlessly pillorying the company over a range of financial issues since it filed for an IPO in June — than on the hows and whys of its release.

And, of course, whether the email would get Groupon into trouble with the Securities and Exchange Commission over whether Mason had touted the company in violation of regulatory disclosure rules.

News of that happening or not will come sooner than later, I suspect, but it is my impression that the very release of Mason’s defense of Groupon in a missive sent out to thousands of staffers — Hey, Henry, how is it that you didn’t get the memo? — says one clear thing about the sentiment of the company’s leadership.

And that is: They could not be more pleased at finally having their say and they couldn’t care less about anything other than being able to strike a blow against the withering attacks.

There are several reasons for this, according to many sources I spoke with this week about the fallout from the email, most of which center around the impact of the negative press on employee morale and the ability to attract new talent.

“It’s made it very difficult for those working at Groupon,” said one source. “But, worse, is how much our reputation is getting burned in the eyes of young engineers we need to recruit.”

What management at the company does not seem to be as worried about, said sources, is investor disinterest when it comes time to hawk and price the public offering.

While the general Wall Street turbulence might spell a lower valuation, sources said Groupon’s execs and board expect to be oversubscribed when it finally gets out on the market.

That’s why Mason — along with some detailed defenses of Groupon’s most controversial issues — tossed off gems like this one:

“For now we must patiently and silently endure a bit more public criticism as we prepare to birth this IPO baby — a breed for which there are no epidurals.”

Since I do happen to know about birthing babies (and Mason decidedly does not): Ouchie!

We’ll see soon enough exactly who will be feeling that pain.

Until then, here’s the classic didn’t-you-get-the-memo movie clip from the hilarious “Office Space”:

Facing a barrage of negative press about its upcoming IPO, Groupon CEO and co-founder Andrew Mason took up a pen to counter critics of the social buying service.

Especially under scrutiny has been the Chicago-based Groupon’s accounting of its finances — along with worries that its torrid growth is slowing — both of which Mason addressed in detail in a pugnacious email memo to his thousands of employees.

Specifically referencing a recent article speculating that the daily deals site was running out of money, Mason said, in part:

“While we’ve bitten our tongues and allowed insane accusations (like in the article above) to go unchallenged publicly, it’s important to me that you have the context necessary to brush this stuff off.”

Mason also took on the controversial ACSOI — or adjusted consolidated segment operating income — metric that Groupon used in its initial filing and later stepped back from.

“The reason we didn’t realize everyone in the world would hate ACSOI (no, it’s not the same reason we didn’t realize everyone in the world would hate our Superbowl ad), is that we think it actually does a pretty good job at describing our marketing expenses in a steady state — we just didn’t realize there would be so many skeptics,” wrote Mason.

Mason also took some aim at competitors, such as LivingSocial and Yelp, in the email.

As for the public offering, which is expected next month:

“If there’s a silver lining, it’s that we’re almost on the other side, and the negativity leaves us well-positioned to exceed expectations with an IPO baby that, having seen the ultrasound, I can promise you is not one of those uglies.”

Then again, that is exactly what a dad-to-be would say about his baby, whatever it looked like.

Mason, when asked about the memo, declined to comment.

There is a lot more than that, so here’s Mason’s full email for all you pencil pushers to peruse:

Dear Groupon,

This weekend, I did a Google News search on our company — my first in awhile. The first story that popped up was called The Fall of Groupon: Is the Daily Deals Site Running Out of Cash? I laughed when I read the headline (in the car by myself, weirdly). First — with this article, the degree to which we’re getting the shit kicked out of us in the press had finally crossed the threshold from “annoying” to “hilarious.” Second, I was struck by the irony — I had just finished a board meeting last Wednesday saying this to myself: I’ve never been more confident and excited about the future of our business.

I realize that this sounds like the kind of thing that CEOs say when they’re trying to pep people up. First of all — I’m all about not pepping people up. If you don’t believe me, just ask my fiancée, Jenny “why don’t you ever say anything nice about me” Gillespie. Want another example? Look at the magazine covers in our lobby, which are there to make you sad by reminding you of the impermanence of success.

I’m going to spend the rest of this email explaining why I’m so excited. You need some ammo to argue back against your blog-reading “friends” (silently argue in your mind, that is — you can’t actually say any of this yet), and I’ve been told that the “what have you ever done with your life that’s so great?” rebuttal isn’t working as well for you guys as it has for me.

While we’ve bitten our tongues and allowed insane accusations (like in the article above) to go unchallenged publicly, it’s important to me that you have the context necessary to brush this stuff off.

I’ll summarize my excitement with four points: 1) Growth in our core business is strong 2) Our investments in the future — businesses like Getaways & NOW — look great, 3) We are pulling away from competition, and 4) We’ve built a great team that I would pit against anyone. In other words, all the stuff that one would want to look good? It looks good.

Many of the long-term unknowns of our business are becoming known, and we like the answers. I will now elaborate in a level of financial detail that will give Jason Child a stomach ulcer.

1. GROWTH IN THE CORE BUSINESS

Thanks to a tremendous effort by our sales team, August in the U.S. is shaping up to be a pivotal month. It appears that will revenues grow by about 12% over last month (which is a lot), while we cut our marketing expenses by 20% in the same period.

Beyond their obvious goodness, these numbers are important because they answer one of the main criticisms thrown at us in the past few months, relating to a metric we put in the S-1 called ACSOI (adjusted consolidated segment operating income) to help people understand how we think about marketing expenses. The reason everyone in the world seems to hate ACSOI is that it makes us look magically profitable by subtracting a bunch of our customer acquisition marketing costs from our expenses. The reason we didn’t realize everyone in the world would hate ACSOI (no, it’s not the same reason we didn’t realize everyone in the world would hate our Superbowl ad), is that we think it actually does a pretty good job at describing our marketing expenses in a steady state –we just didn’t realize there would be so many skeptics. I think it’s worth going deep on this one more time — brace yourself.

Our internal forecast shows two different types of marketing: what I’ll call “normal marketing” — which is NOT excluded from ACSOI — and “customer acquisition marketing,” which is. The way Groupon spends on marketing is unique in three ways:

1. We are currently spending more than just about any company ever on marketing — in Q2, we spent nearly 20% of our net revenue on marketing, while a typical company spends less than 5%. Why do we spend so much? The simple answer is “because it works.” But thats only part of what makes our situation special.

2. Our marketing — at least the customer acquisition marketing that we remove from ACSOI — is designed to add people to our own long-term marketing channel — our daily email list. Once we have a customer’s email, we can continually market to them at no additional cost. Compare this to Johnson and Johnson, McDonald’s, or most other companies. If I’m a Johnson, and I’m trying to sell you a box of Band Aids, I have to keep spending money on commercials and magazine ads and stuff to remind you about how sweet Band Aids are, even after you’ve bought your first box. With Groupon, we just spend money one time to get you on our email list, and then every day we email you a reminder of the sweetness of our metaphorical Band Aid. There is no cost of reacquisition — that’s unusual (and we created ACSOI to point that out). If Johnson wanted to follow the Groupon strategy, he would have to start a free daily newspaper about bandages and then run Band Aid ads in it every day.

3. Eventually, we’ll ramp down marketing just as fast as we ramped it up, reducing the customer acquisition part of our marketing expenses (the piece that we remove in ACSOI) to nominal levels. We are spending a ton now because we’re acquiring as many subscribers as we can as quickly as we can. We aren’t paying attention to marketing budget (just marketing ROI) in the way a normal company would, because we know that even if we wanted to continue to spend at these levels, we would eventually run out of new subscribers to acquire. So our customer acquisition spend drops severely to reflect the fact that eventually we’ll run out of people we can add to our email list. We view this internally as a very large one-time expense and then our job forever after will be to continually convert these subscribers into customers and to make sure our customers keep buying from us. Ongoing, the normal marketing dollars we spend are not something we would remove from our internal calculation of ACSOI.

I tried my best to explain this simply, but it’s not lost on me that if you actually understood this, you probably had to read it three times. It’s not easy stuff. It’s much easier to assume that we’re goons. So people can be forgiven for being suspicious. In fact, feel a little bad about how downhearted the critics will be when we don’t turn out to be a Ponzi scheme — those are good impulses for journalists to have, and I hope our non-evil ways don’t destroy their spirits.

Anyway, there’s a reason that I just went on about ACSOI. One of the questions that skeptics ask is, “when you ramp down marketing, won’t revenues stop growing as well? Aren’t you just buying growth?” Over the past several months we’ve been consistently reducing our marketing spend and yet revenues are still increasing at a significant pace. In Q1 of this year, marketing represented 32.3% of our net revenues. By the end of Q2 it had fallen to 19.4%. And it has continued to fall over the past several months all because we’ve been investing in our own long-term marketing channel — our email list.

Internationally we see the same trends — marketing is down, but revenues are up — every country is either losing less or making more. Even in young markets like Korea, where we’re still making massive investments, we’re seeing unprecedented growth. We started building our Korean team this January, despite the presence of two competitors that were larger than any we’d previously battled from behind. Thanks to the brilliant execution of the Korean team, we are set to be the market leader within months. We’ve never had a country grow as fast as Korea!

What about our joint-venture with Tencent in China? Did you read the article that Gaopeng’s CEO has kidnapped the first born children of all our employees and is putting them to work building a laser beam he’ll use to slice the moon in half? It turns out that that one isn’t true either. China is definitely a different market, but every month we inch closer to profitability. As has been our strategy in launching other countries — Germany, France, and the UK, included — our China growth strategy was to hire quickly and manage out the bottom performers. So far, that strategy has improved our competitive position in China from #3,000 to #8. Will we one day reach the dominant status we enjoy in most (come on, Switzerland!) other countries? It’s too soon to tell, but there’s no question in my mind that we’re building a business that will be around for the long haul.

2. NEW BUSINESS LINES ARE BOOMING

Travel and Product are enormous opportunities. After only a few months, they’re already making up 20% of revenue in some countries. We sold $2M worth of mattresses in the UK — in one day! Groupon Getaways will do $10M in its first calendar month — which you might think is awesome, but we’re actually disappointed with those results because we know how much better we’ll be doing soon.

While there’s still a ton of work to do, Groupon Now! continues to see weekly double digit growth. The model works and I believe it will play a major part in the future of our global business as more merchants and customers join the marketplace.

3. WE ARE PULLING AWAY FROM COMPETITION

If there’s a question I’ve received from Groupon skeptics more than any other, it’s, “how will you fend off the competition — especially massive companies like Google and Facebook?” I could give a dozen reasons to bet on Groupon, but it’s impossible to predict the future or the actions of others. Well, now the sleeping giants have woken up — and the numbers are showing that what was proven true with literally thousands of other competitors is just as true with the incumbents of the Internet: it’s kind of hard to build a Groupon. And since anyone with an Internet connection can track the performance of our competitors, I can be more specific:

Google Offers is small and not growing. In the three markets where we compete, we are 450% of their size.

Yelp is small and not growing. In the 15 markets where we compete, our daily deals are 500% of their size.

Living Social’s U.S. local business is about 1/3rd our size in revenue (and smaller in GP) and has shrunk relative to us in the last several months. This, in part, appears to be driving them toward short-sighted tactics to buy revenue, like buying gift certificates from national retailers at full price and then paying out of their own pocket to give the appearance of a 50% off deal. Our marketing team has tested this tactic enough to know that it’s generally a bad idea, and not a profitable form of customer acquisition.

Facebook sales are harder to track, but are even less significant at present.

My point is not that our competitors will fail — some may actually develop sustainable businesses, or even grow — after all, local commerce is an enormous market. The real point is that our business is a lot harder to build than people realize and our scale creates competitive advantages that even the largest technology companies are having trouble penetrating. And with the launch of NOW, I suspect our competition will have an even harder time in light of the natural barriers to entry that are needed to build a real-time local deals marketplace.

4. OUR TEAM

This is the fluffiest of the four points, but maybe the most important — we’ve built a global team of hungry entrepreneurial operators and seasoned executives that rivals any team I know of. Almost every day, I find myself in a scenario where I silently think, “I can’t believe I got this person to work for me — that failure of judgement is perhaps their single flaw.”

I point out the team because while today the business is strong and it appears we must endure success for awhile longer (despite its impermanence), we will inevitably be challenged with issues we didn’t predict — and when that happens, the quality of our team will be a deciding factor in our ultimate long-term success.

FINAL THOUGHTS

I wrote this email because when I read some of the press this weekend, I realized a rational person could read this stuff and wrongly conclude that we’re in trouble. The irony is hopefully clear: We’ve never been stronger.

And while we’ve refrained from defending ourselves publicly, you’ve continued to create our best defense, with every department innovating new practices that are taking our business to the next level. Thanks for staying tough, determined, and agile throughout this process. For now we must patiently and silently endure a bit more public criticism as we prepare to birth this IPO baby — a breed for which there are no epidurals. If there’s a silver lining, it’s that we’re almost on the other side, and the negativity leaves us well-positioned to exceed expectations with an IPO baby that, having seen the ultrasound, I can promise you is not one of those uglies.

I’ve been as candid as possible — hope this sheds some light on things. Reply with your questions if anything remains unclear. Amidst all this, I hope you remember what we’re doing here — we are making history together. I guess you don’t get to build something that reshapes the local commerce ecosytem without getting a few bruises. I’m so proud of the work we’re doing, and I feel extraordinarily lucky to work on what I think is the best thing that’s happened to small businesses since the telephone We’ve invented something that is catalyzing millions of dollars of local commerce every single day in 45 countries and fills the lives of millions of customers with unforgettable experiences — it’s pretty remarkable.

Looking forward to getting this behind us!

Andrew

P.S.: I almost forgot to address the nonsense about us running out of money in the article above. If you apply the same logic used in the article, you’d have concluded long ago that companies like Amazon and Wal-Mart were running out of cash too. Both have often had payables far in excess of their cash. Finance geeks call this a working capital deficit. It’s normal, manageable and a lot of folks actually believe it’s good thing and would kill to get paid from their customers long before they have to pay their suppliers. We are generating cash, not losing it — we generated $25M in cash last quarter alone, adding to the $200M we had before. In other words, we’re doing the opposite of running out of money.

Speaking of “it looks good,” here is Conan O’Brien with a Tourette’s version of Mason’s new catchphrase:

As All Things Digital reported last week, Groupon filed an amended S-1 IPO offering this morning, in which it deemphasized a controversial accounting method.

Instead of a metric called ACSOI, or adjusted consolidated segment operating income, the Chicago-based social buying company noted that gross profit was the “important indicator for our business, because it is a reflection of the value of our services to our merchants.”

But the dreaded ACSOI — which leaves out important costs of marketing — is not completely gone. In its filing, Groupon said it would use it internally, noting:

We exclude those costs because, unlike our other marketing expenses, they are an up-front investment to acquire new subscribers that we expect to end when this period of rapid expansion in our subscriber base concludes. While we track this management metric internally to gauge our performance, we encourage you to base your decision on whatever metrics make you comfortable.

In other words, for the love of Pete, please ignore ACSOI completely.

Groupon also included new financials in its filing for the quarter, with a 36 percent increase in revenue to $878 million from the previous quarter and double a year ago. But its loss was $102.7 million, compared to a loss of $35.9 million a year ago.

The company also reported that its subscribers grew from 10.4 million last year to 115.7 million now.

Costs are also lower by eight percent in the new quarter, with Groupon spending $165.2 on marketing to new subscribers, compared to $179.9 million in the previous one.

The filing with the Securities and Exchange Commission is a critical one for Groupon, whose public offering has been mired in questions about how it accounts for its financial performance.

Of particular concern: ACSOI, which is a number that does not include important costs, such as critical online marketing expenses to attract new customers to Groupon.

Such accounting is called non-GAAP (generally accepted accounting principles).

In 2010, Groupon reported that it lost $413.4 million using standard accounting practices. When it excludes some costs from its calculations using ACSOI — including online marketing expenses to attract new customers — it recorded a profit of $60.6 million in 2010.

The new results were stronger, to be sure. Such growth is important, especially given investor scrutiny of Groupon in the current economic turmoil.

As I wrote last week:

And, indeed, questions from the media, investors and, most importantly, the Securities and Exchange Commission about how Groupon accounts for its revenue and profits using ACSOI were swift and decidedly negative.

Hence, a furious debate — along with much internal tension — within Groupon about what to do. At first, in another S-1 amendment, the company backed away from using ACSOI as a “valuation metric.”

But that was apparently not enough for the SEC or anyone else, so Groupon’s top managers finally thought it best to rid itself of the term entirely.

Presumably, with a cleaner S-1, Groupon can concentrate on a whole new set of issues around its IPO, such as the tumultuous state of the markets.

According to numerous sources close to the situation and after regulatory pressure, Groupon will amend its S-1 public offering filing to remove references to an unusual accounting treatment that has attracted controversy.

Sources said the new filing by the social buying company, which is helmed by CEO and co-founder Andrew Mason (pictured above), will likely occur as early as Monday.

It can’t come a minute too soon regarding a metric called ACSOI, or adjusted consolidated segment operating income, which the Chicago-based Groupon used when it filed its S-1 documents in June.

As I wrote at the time about the odd use of ACSOI:

Let’s be clear, this is a number that does not include important costs, such as critical online marketing expenses to attract new customers to Groupon.

Such accounting is called non-GAAP (generally accepted accounting principles).

In 2010 and the first quarter of 2011, Groupon said its Adjusted CSOI was $60.6 million and $81.6 million, respectively.

On a GAAP basis, Groupon lost $413.4 million for 2010 and $113.9 million in the first three months of 2011.

And, indeed, questions from the media, investors and, most importantly, the Securities and Exchange Commission about how Groupon accounts for its revenue and profits using ACSOI were swift and decidedly negative.

Hence, a furious debate — along with much internal tension — within Groupon about what to do. At first, in another S-1 amendment, the company backed away from using ACSOI as a “valuation metric.”

But that was apparently not enough for the SEC or anyone else, so Groupon’s top managers finally thought it best to rid itself of the term entirely. That will happen next week, sources said.

And, in coming weeks, sources added, the company will be filing additional financial information about both its growth and costs, which will undoubtedly also be put under a microscope by the media, investors and regulators.

A Groupon spokesman declined to comment when asked about the removal of ACSOI from its public offering documents.

Groupon said in a blog post today that it has been working with Obtiva since 2009, and that many of its development teams include employees from Obtiva. Terms of the deal were not disclosed.

The acquisition follows aggressive expansion plans in the San Francisco area, with the specific purpose of adding more tech talent.

Groupon kicked off its West Coast expansion late last year by opening a 12,000-square-foot office in Palo Alto, where it hoped to build a tech team that could work directly with its Chicago-based employees.

It lists roughly 30 job openings for the Silicon Valley office on its Web site.

At D9 in June, Groupon’s CEO Andrew Mason lamented that his “biggest mistake was waiting to open an office in Silicon Valley,” adding that Chicago is a great town, “but it doesn’t have the depth of talent that you guys have.”

Earlier today, CNBC reported that the regulatory review of Groupon’s questionable use of certain accounting metrics in its IPO filing was delaying its offering until later in September.

While more questions from the Securities and Exchange Commission about how it accounts for its revenue and profits might indeed eventually push the IPO debut out, according to sources I have interviewed for months now, an offering in mid to late September was actually when the social buying company was planning to take its company public.

It makes sense, since August is seldom used for road shows for companies headed for an IPO — think Wall Street in the Hamptons and you’ll get why.

That said, the continued scrutiny by the SEC is not a welcome development for Chicago-based Groupon, which filed its S-1 documents in June.

In coming weeks, sources said, the company will be filing new financial information about both its growth and costs, which will undoubtedly be put under a microscope by investors and regulators.

That’s no surprise since the contents of the original filing immediately caused controversy, especially over the amount of its venture funding paid out to insiders and also over an unusual accounting treatment called adjusted consolidated segment operating income, or Adjusted CSOI.

As I wrote at the time:

Let’s be clear, this is a number that does not include important costs, such as critical online marketing expenses to attract new customers to Groupon.
Such accounting is called non-GAAP (generally accepted accounting principles).

In 2010 and the first quarter of 2011, Groupon said its Adjusted CSOI was $60.6 million and $81.6 million, respectively.

On a GAAP basis, Groupon lost $413.4 million million for 2010 and $113.9 million in the first three months of 2011.

Said Groupon about its accounting in its S-1 filing: “We believe Adjusted CSOI is an important measure of the performance of our business as it excludes expenses that are non-cash or otherwise not indicative of future operating expenses.”

Definitely sketchy enough to attract an SEC look-see, which caused Groupon to back away from Adjusted CSOI as a “valuation metric” in a recently amended S-1 filing. Groupon also stepped back a sloppy comment made after the filing by its Chairman Eric Lefkofsky — in a interview he apparently thought was off the record — that the company would be “wildly profitable.”

One thing is certain: There will surely be more amending of the Groupon S-1 in the weeks ahead as it stumbles toward its IPO, which will be one of the most prominent of the Web 2.0 era.

Groupon sent out emails to its users this weekend, about changes it has made to its privacy statement and terms of use.

Among the most notable changes is more information about the Chicago-based social buying start-up’s collection and use of mobile location information.

Said Groupon:

“In short, if you use a Groupon mobile app and you allow sharing through your device, Groupon may collect geo-location information from the device and use it for marketing deals to you (and for other purposes listed in the “How Groupon Uses Personal Information” section of the Updated Privacy Statement).”

In other words, if you let them, in order to improve the experience and make the Groupon Now app more useful, you’re being tracked.

This, of course, has been a dicey issue of late, most recently related to Apple and Google smartphones and what information they collect and retain.

In addition, with a pending IPO, Groupon is under all kinds of scrutiny and any big changes will be closely studied.

In addition, in its email to customers (see below in its entirety), the company said that it had broadened the definition of personal information to include your interests and habits and also that it may share that personal information with partners in new offering areas, such as travel deals with Expedia.

Groupon said it was also trying to improve readability of its consumer information and give greater transparency to its customers.

Here is the whole Groupon memo about the changes:

Wondering about Changes to the Groupon Privacy Statement?

We want to tell you a little more about some material changes we just made to the July 22, 2010 version of the Groupon Privacy Statement (the “Old Privacy Statement”) to create the new Groupon Privacy Statement (the “Updated Privacy Statement”).

In general, all of the changes to the Updated Privacy Statement were made to improve readability, provide greater transparency about our information handling practices, address some new types of relationships Groupon is forging and new technologies Groupon is using or may use, and to let you know about the privacy choices you have. Read on.

* Groupon continues to be a proud member of the TRUSTe Privacy Program. The Updated Privacy Statement contains a reference to the most current version of the TRUSTe Program Rules and includes some additional statements required by those Program Rules. As a TRUSTe Privacy Seal holder, Groupon is committed to complying with the Program Rules as applicable to its online privacy program.

* The Updated Privacy Statement replaces the phrase “Personally Identifiable Information” with “Personal Information” to improve readability and accuracy. (More on this below.)

* The Updated Privacy Statement clarifies that Personal Information is any information that could be used to identify, locate or contact an individual. This definition is broader than the definition in the Old Privacy Statement, which limited the concept of personally identifiable information to identification information in the context of certain defined identification activities. (Whew!) The broader definition in the Updated Privacy Statement reflects our dedication to protecting privacy in all areas of our business.

* The Updated Privacy Statement includes a definition of Personal Information and explains the types of Personal Information collected, used and disclosed by Groupon, namely “Contact Information,” “Relationship Information,” “Transaction Information,” “Financial Account Information,” and “Mobile Location Information.” These definitions provide more meaningful definition about the types of information we collect and how we classify information internally.

* The Updated Privacy Statement has shortened the section that goes on about how we use and disclose non-identifiable information. This change was made to improve readability so we could focus more on talking about what we do with Personal Information.

* The Updated Privacy Statement contains information on Groupon’s collection and use of Mobile Location Information. In short, if you use a Groupon mobile app and you allow sharing through your device, Groupon may collect geo-location information from the device and use it for marketing deals to you (and for other purposes listed in the “How Groupon Uses Personal Information” section of the Updated Privacy Statement).

* The Updated Privacy Statement presents Groupon’s disclosures of Personal Information in a more detailed and transparent fashion. The new “When and Why Groupon Discloses Personal Information” section of the Updated Privacy Statement details the circumstances when Personal Information is shared with third parties in a comprehensive, bulleted-list format. This section reinforces Groupon’s commitment to protect privacy by generally limiting disclosures of Personal Information to our affiliates and services providers and to those merchants and business partners with whom our users interact.

* The Updated Privacy Statement omits the section in the Old Privacy Statement regarding disclosures of Personal Information to Google for remarketing purposes. Groupon does not provide Personal Information to Google for remarketing.

The Old Privacy Statement’s section on “Data Tracking” has been replaced with an expanded section on “Cookies and Related Technologies” to provide greater transparency around data collection technologies. This section contains information about all of the ways that we collect information using automated technologies, including cookies, pixel tags, web beacons, browser analysis tools, and web logs. The section is designed to educate readers about the types of data collected by each technology as well as how the data is used by Groupon. The Updated Privacy Statement clarifies that if automatically-collected data is associated with Personal Information, it is protected by the Updated Privacy Statement. This section also provides information about third party advertising relationships in a more readable form and includes a new paragraph regarding our relationship with Omniture.

* The Updated Privacy Statement contains an expanded section on user choice. The “Your Choices” section in the Updated Privacy Statement provides readers with information on many different types of privacy choices that they can make, along with instructions for exercising the choice. This section also consolidates information on choices that was distributed throughout the Old Privacy Statement and contains a new link to the TRUSTe preferences page.

* The Updated Privacy Statement’s section on “Security of Personal Information” has been streamlined to more-simply state our commitment to maintaining a reasonable information security program with expected administrative, technical and physical controls.

* The Old Privacy Statement’s section “Updating and Correcting Personal Information” has been replaced with a new section “Accessing and Correcting Personal Information.” This section has been revised to improve readability and clarify the processes by which users can access, update and delete their Personal Information. This section of the Updated Privacy Statement also contains a new paragraph regarding data retention. This paragraph was added for clarity and to comply with the TRUSTe Program Rules.

* The Updated Privacy Statement contains a new section giving “Notice to Residents of Countries Outside of the United States of America.” This section educates international users about the fact that Groupon is based in the U.S. so Personal Information may be transferred to the U.S. for processing.

* The “Miscellaneous Privacy Issues” section in the Old Privacy Statement has been deleted and the content it contains has been included in more appropriate, descriptive sections elsewhere in the policy. Also, we omitted the section discussing children’s information because Groupon is not designed for children and the Groupon deals are not offered to individuals under the age of majority in their states of residence. See our Terms of Use.

* The Updated Privacy Statement introduces a new contact mechanism for privacy-related inquiries: privacy@groupon.com. While general customer service questions should still be directed to support@groupon.com, the new address provides a way for us to respond to questions that our users have specifically about the privacy of their Personal Information.

And here is the email sent to users, titled “Updates to Privacy Statement and Terms of Use”:

We wanted to let you know that we’ve updated both our Privacy Statement and our Terms of Use. These new terms, which affect all Groupon users, accommodate our new products and services that allow us to offer you more relevant deals.

If you don’t feel like wading through long legal documents, here’s a summary of the notable changes, in plain English:

We’ve clarified that Groupon Now! and our other mobile apps may collect geo-location data. This lets us present you offers that are close by. See Sections 1 and 5 of the Privacy Statement.

We’ve broadened the definition of “personal information” to include your interests and habits, and provided additional details about how we collect and use your information. We’ve done this so that we can better understand what types of offers you’ll find valuable. See Section 1 of the Privacy Statement.

You may know that we’ve started working with partners to offer Groupon users new deal categories — for example, travel deals with Expedia. Our new privacy statement explains that we may share your personal information with these partners if you subscribe to special communications or buy deals in these new deal categories. See Section 4 of the Privacy Statement.

We’ve updated our Terms of Use to help you understand the expiration policies for different vouchers, including Groupon NOW! vouchers. This explains, for example, that if you don’t use a Groupon NOW! voucher within 30 days we’ll refund the purchase amount. See Section 7 of the Terms of Use.

We also clarified our expectations to ensure that our customers and visitors use the services on our website in a way that keeps the experience good for everyone. For example, we’ve prohibited abusive practices like opening multiple accounts, submitting false information and other practices that we think detract from everyone’s experience with us. See Section 5 of the Terms of Use.

Groupon’s S-1 filing for an IPO last month certainly got a lot of ink.

Unfortunately, much of it was negative, focused on several controversial parts of the document. Most scrutinized were large slugs of money taken out of the social buying site by its founders, as well as aggressive accounting terminology to make large losses look less, well, large.

Rattled by the intense media and analyst reaction to the filing, sources said the Chicago-based company commissioned a poll of its consumers and merchants to gauge the impact.

One source familiar with the survey said that top execs and its board wanted concrete reaction from key constituencies, instead of relying on “noise from the echo chamber” of Wall Street and Silicon Valley.

And, said several people who had seen the poll, it should probably come as no surprise that the impact of the drumbeat of Groupon-is-doomed news on merchants and consumers was low, with only one percent saying that they had formed a negative opinion of the company from the filing.

That, of course, does not mean that those important groups for Groupon aren’t disgruntled about a whole laundry list of other issues.

But — for now, at least — an S-1 with some warts isn’t one of them.

Whatever the case, Groupon will continue to face scrutiny as it moves to amend the filing after comments from government regulators, and also when it reports its latest financial results soon for the three months ended June 30, 2011.

And those are numbers that everyone will surely be paying attention to.

Do you think Zynga’s Mark Pincus would put a cat on his head for a national magazine shoot? Or LinkedIn’s Jeff Weiner? Or, perish the thought, Mark Zuckerberg of Facebook?

But the wacky stylings of Groupon CEO and co-founder Andrew Mason seem to demand it.

Thus, straight-faced, he appears in a very long article, titled “Letter From Chicago: Groupon Therapy,” in this month’s Vanity Fair magazine with a very fat tabby cat clawing onto his noggin.

There’s also a shot of Mason in the equally kooky “Michael’s Room” at Groupon HQ and the expected plethora of ironic hipster anecdotes, such as the opening one about Mason almost giving a spotted pony to New York City Mayor Michael Bloomberg on a visit.

According to the piece:

“He had originally planned to give the mayor a puppy, but decided that a pony would be even more memorable. ‘I mean, it’s such a heavy thing to gift someone,’ he said, laughing. ‘I thought it would be funny to give it to somebody as busy as the mayor.’”

Buuuuurnnn!

Otherwise, it runs through all the whistlestops of the basic Groupon story — about its aggressively non-corporate nature, the pros and cons of using the social buying service, the insidious copycat competitors, the famously rejected $6 billion Google acquisition offer and, finally, the splashy upcoming IPO.

Also, as usual, the fretful worries about Groupon’s staying power, as evidenced by the Emma Stone-tastic cover tagline:

“Is Groupon This Year’s Facebook? (or Next Year’s Pets.com?)”

How about let’s be a little more creative and say neither.

Moving along, of course, plenty about the lovable Yogi Bear of a CEO, Mason, who apparently plays the accordion (who knew?), but who one close friend insisted was also highly disciplined and serious.

Of course he is, but not for lack of trying to seem not so much that way.

As he is quoted in Vanity Fair telling a group of new Groupon employees at an orientation session: “As we get bigger, instead of being like most companies, conforming and becoming more normal, we want to become weirder.”

With that cat on his head, this month at least: Mission accomplished, Andrew!

You can also check out more Mason funster times in this video of a very entertaining interview I did with him at the ninth D: All Things Digital conference recently:

(Photo credit: Martin Schoeller, exclusively for Vanity Fair.)

]]> http://allthingsd.com/20110705/yes-that-is-a-cat-on-the-head-of-a-soon-to-be-public-company-ceo-and-of-course-its-groupons-andrew-mason/feed/ 0 http://allthingsd.com/20110629/what-to-expect-when-youre-expecting-a-zynga-ipo-insider-selling-natch/ http://allthingsd.com/20110629/what-to-expect-when-youre-expecting-a-zynga-ipo-insider-selling-natch/#comments Wed, 29 Jun 2011 15:07:46 +0000 Kara Swisher http://allthingsd.com/?p=92568

So exactly how fecund is “FarmVille”?

If reports hold, we’ll all find out today what the yield is from the online gaming phenom Zynga, which will finally be filing its regulatory documents sometime today.

The S-1 for a public offering valued at up to $20 billion, which will contain all kinds of juicy information about the San Francisco-based start-up’s business, is likely to come out after the markets close. Zynga is expected to raise $2 billion in the offering.

Before everyone gets to see what’s in it, there’s a lot that investors should be looking out for, based on recent IPO filings by similar companies, such as Groupon.

Digging Up New Accounting Ground

As Tricia Duryee pointed out, Zynga will be the “first major U.S. company supported primarily by the sale of virtual goods” to file.

That’s what will likely make the Zynga filing very interesting, from an accounting point of view.

How Zynga handles its accounting is sure to be much scrutinized, especially since Groupon attracted all kinds of ugly from its unusual treatment of its financial results.

To defocus from its money-losing under GAAP acounting, the Chicago-based social buying service used the more attractive “Adjusted CSOI,” which is defined as adjusted consolidated segment operating income.

My definition: Sketchy!

Zynga’s finances are expected to look better, reportedly generating about $400 million in profit last year on about $850 million in revenue.

It will be important to pay attention to the breakdown of those revenues and about what period of time the company accounts for them.

As Duryee wrote, Zynga has several choices:

Game-based model: The company recognizes revenue over the life of the game.

User-based model: Revenue is recognized over the estimated life a user plays the game.

Item-based model: Revenue is recognized based on the implied or explicit life span of the item — in other words, how long it would last in the real world. Examples of more durable goods are virtual vehicles, furniture or weapons. Revenue from these would be recognized for as long as the player stays active in the game. Revenues from a more consumable item, like a virtual cup of coffee or a jolt of energy, would be recognized almost immediately.

And there are still other factors to take into consideration, such as whether the goods were paid for with virtual currency or real cash, and how much information a company has for establishing the averages.

In the Revenue Weeds

Another interesting thing to study will be the revenue breakdown for Zynga, especially as it relates to its biggest platform provider, Facebook.

Such as: How many in-game items are purchased directly on Facebook versus through gift cards purchased in the store? How big (or small) is Zynga’s advertising business? What about mobile games? Will the profitability of individual games be called out, with details about their performance?

And, of all its various distribution platforms for its games, where does it get the most mojo?

That’s important, since Zynga will be seen as a proxy for Facebook’s business. Thus, a lot of investors might find some nuggets of information, since the pair are so tightly intertwined as businesses.

Facebook, of course, has been famously trying not to IPO, so any indication of the social networking site’s business will be carefully studied.

Reaping the Insider Rewards

Lastly, it’ll be important to see who is selling what and when among current Zynga investors.

Groupon ran into a buzz saw of criticism from the giant payouts its founders took out of the company from its massive venture funding rounds.

As Peter Kafka wrote:

Groupon raised a total of $946 million in two funding rounds last winter. It kept $136 million of it to help run the money-losing company. The remaining $810 million was paid out, via stock purchases, to CEO Andrew Mason and some of his backers, including Eric Lefkofsky, and, notably, the Samwer brothers, who sold their CityDeal company to Groupon in 2010 … Of note: This wasn’t the first time Groupon had raised money and taken cash off the table. In April 2010, the company raised $130 million, and handed $120 million to many of the same people.

My definition: Even sketchier!

Along with its founder and CEO Mark Pincus, Zynga investors are the pantheon of venture players, including Digital Sky Technologies, Kleiner Perkins, Union Square Ventures and angel investors LinkedIn founder Reid Hoffman and Peter Thiel.

How much Pincus and others inside the company have taken out and are selling should be one of the first places new investors should look.

Because with the hyped valuations that many of these Web 2.0 companies are getting, who’s zooming who should be a key sign to pay mind to.

]]> http://allthingsd.com/20110629/what-to-expect-when-youre-expecting-a-zynga-ipo-insider-selling-natch/feed/ 0 http://allthingsd.com/20110613/talk-about-discounting-groupon-gets-a-pre-ipo-smackdown/ http://allthingsd.com/20110613/talk-about-discounting-groupon-gets-a-pre-ipo-smackdown/#comments Mon, 13 Jun 2011 13:15:54 +0000 Kara Swisher http://allthingsd.com/?p=85870

It has only just announced its IPO plans, but Groupon is already getting a bitter taste of the brutality of being more public in an increasing series of negative reports aimed at its business prospects and execs.

That has included a spate of posts after it filed to go public last week about the unusual accounting treatment in an S-1 regulatory filing for the offering, which also showed a large outflow of its venture funding to the pockets of the Chicago-based social buying site’s founders.

Since then, though, the gloves seem to be off for Groupon, just as it starts to market itself to Wall Street investors.

Perhaps the toughest so far has been one written by Fortune’s Kevin Kelleher, painting a very sketchy investing portrait of the company’s Chairman and co-founder Eric Lefkofsky.

Wrote Kelleher in a piece titled “The Checkered Past of Groupon’s Chairman”:

But Groupon’s IPO has brought an uncomfortable spotlight onto Lefkofsky. While some attention focuses on his ambitions as an investor in tech start-ups, others see a “spotty history” and draw parallels between the past and the present. Lefkofsky’s track record, reflecting failures and successes, bears certain hallmarks: Rapid revenue growth accompanied by big losses, a penchant to sell stock early on, and lawsuits filed by investors, lenders or customers who feel they have been wronged.

Ouch.

While one of the lawsuits mentioned in the piece was dismissed with prejudice, it did not help that the piece included an early email used in the case, written by Lefkofsky in the Web 1.0 era, that read in part:

“Lets start having fun…lets get funky…let’s announce everything…let’s be WILDLY positive in our forecasts…lets take this thing to the extreme…if we get wacked [sic] on the ride down-who gives a shit…THE TIME TO GET RADICAL IS NOW…WE HAVE NOTHING TO LOSE…”

Double ouch, even if it is probably a bit unfair to use such rookie remarks from a young entrepreneur back then to reflect on him today.

Still, Lefkofsky — whom I met with recently at Groupon’s HQ and found as whip-smart and savvy as any Silicon Valley sharpie — does seem to need to be more circumspect in his utterances today.

Most specifically, the day after its IPO filing, he told Bloomberg in an interview that Groupon will be “wildly profitable,” referencing worries about losses unveiled in its financial statements and his past record of start-ups.

Said Lefkofsky on June 3:

“I’m going to be in technology for a long time. I’m going to start a lot of companies. These are not sham companies. These are great businesses. InnerWorkings is profitable. Echo is profitable. Groupon is going to be wildly profitable.”

While sources said it is unlikely that Groupon will be forced by the Securities and Exchange Commission to make a new filing due to the remarks, it’s just the kind of mistake the typically voluble company needs to avoid going forward.

In other words, no more words from Groupon.

]]> http://allthingsd.com/20110613/talk-about-discounting-groupon-gets-a-pre-ipo-smackdown/feed/ 0 http://allthingsd.com/20110503/buywithme-acquires-dealadayonline-to-expand-into-chicago/ http://allthingsd.com/20110503/buywithme-acquires-dealadayonline-to-expand-into-chicago/#comments Tue, 03 May 2011 15:50:06 +0000 Tricia Duryee http://emoney.allthingsd.com/?p=5075 BuyWithMe, which is one of hundreds of companies competing against Groupon and LivingSocial in the group-buying space, is acquiring DealADayOnline to enter the Chicago market. In March, the New York-based company purchased LocalTwist to enter Seattle and San Diego. BuyWithMe currently offers deals in 13 markets and has ambitions to double that footprint this year. No terms were disclosed.

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