Groupon must be getting used to losing things. The online coupon purveyor announced that Marc Samwer, the head of its crucial international business unit, will be leaving the company. Considering that the firm -- which lately announced it would restate its recent accounting and hasn't yet posted a profit -- badly needs stability, the timing of the departure is awful. But the company has deeper problems to address.

Home is not where the high growth is
Losing such a top-level executive would be a blow for any firm. It's much more so for Groupon -- particularly when said exec is in charge of foreign business, which comprises an exponentially increasing share of company revenue. In the fourth quarter, the take from outside of North America totaled $312.5 million, while domestic revenue was a notch under $180 million. By contrast, in the same period the year before those numbers were much more even ($88.3 million and $83.8 million, respectively).

In other words, foreign sales have quickly outpaced domestic to account for nearly two-thirds of the company's revenue. In fact, for fiscal 2011, overseas revenue grew by 767% -- the hare to domestic's 217% tortoise.

For Groupon, overseas success is critical if it's to turn its business around and start making a profit. Meanwhile the competitive edge that helped produce those zooming revenue increases is dulling quickly.

Here come the big boys
At least the company is plugging the hole quickly and sensibly. It has hired a new international chief, Veit Dengler, with years of experience in the tech space selling American wares to clientele abroad. He was formerly Dell's (NAS: DELL) head of Eastern European and Russian operations. The big American PC retailer does solid business abroad: This past fiscal year it brought in $31.6 billion from foreign sales, or 51% of its grand total for the year.

Dengler's new job won't be an easy one to do well. Groupon's big disadvantage is that its business model is very easy to replicate; all a competitor really needs is the talent to craft good deals with local enterprises and a solid platform on which to offer the resulting coupons.

Ominously for Groupon, some of the web's biggest heavyweights have realized this and are reacting accordingly. Amazon (NAS: AMZN) now offers daily deals through its Local sites targeted to particular American markets. These deals routinely offer discounts of 50% or more on food, drink, and merchandise, and the Locals cover nearly every major U.S. municipality.

Never to be outdone in the Internet space, Google (NAS: GOOG) has gotten in on the action, too. At last count its deals can be had in more than 40 cities from New York to Los Angeles. Like Amazon and Groupon, these coupons offer compelling discounts on swag and services.

If those two powerful companies have been able to get up to speed so quickly on the domestic market, how far behind can foreign versions of their deal sites be? Probably not far at all. Deal-hunting is a universal pastime, and the $300 million-plus Groupon made last year from foreign coupons represents a market too juicy to ignore.

Top-level executive departures are painful for any company. The timing of this one, though, is particularly hurtful. Groupon needs all the stability and talent it can get; the competition is coming, and the ensuing fight's going to be a hard one.

Groupon's not the only company struggling to turn a profit in the tech space; it's a tough sector to compete in. But we've got the skinny on a company that's pouncing on the latest developments. Find out which firm that is in this free report.

At the time this article was published

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Seriously ? No one comes close to the Samwers regarding operations and executions, they were there to get Groupon in as many countries as possible and get them the leadership everywhere. They did it but at the expense of everything else, everybody knows it. The pressure is unbearable and profit is the only word known, hence merchants and employees are cut to ribbons. Marc was the right guy for short-term development but everyone knows it was doomed to fail it things did not change to a long-term visions. Margo Georgiadis failed to make it happen but stressed it during her entire time, now this is Dengler's mission to make the transition between crazy short-terme money incentives and long term vision without ruining growth. Now is the time, finally, when Groupon overseas will learn to developp consumer trust, merchant respect, and global transparency. It will benefit them as well if they get part of the US technology and embrace Groupon American vision, which is far more fair to merchants and consumers. There's more money abroad but far more legal issues, refunds and an absolute mess that burnout employees won't bear for much longer. Most of Groupon overseas died for this to happen and knew if would make a crucial change from a money-grabbing apparent scam to a respected hi-tech company. All of their recent moves make sense and make its model less and less easy to replicate. They have stopped introducing new countries since Thaïland and seem to stop the crazy hiring apart from engineers, all the data geeks and still some salespeople, but many departments have just stopped the crazy hiring of old times, same with marketing costs aimed at new customers. They now focus on activating these customers and not buying them which is far less costly as well. Some countries still experience double-digit growths that would make any other business lose their mind. We see the beginning of something that can trash itself right away but if they play it smoothly they'll change the face of local business, make billions out it and launch themselves into plenty of other businesses just like they're beginning to. They won't become an Amazon, Expedia or Live Nation but they will get a slice of the cake. One, and one, and one... These slices could make Groupon's cake unbelievable in a few years. One must know the inside cultural and ideological differences between the North American and the international Groupon. The latter made the whole grow but could have crashed it soon, good or bad timing does not matter, they needed this move, Groupon in American is far more smart than most analysts think. They have years of advance on their international counterpart in every area : technology, data, employees experience, CS development, branding, editorial identity, design, merchant tools, revenues per salespeople, senior management, HR, training, cloud resources, etc. This might be the move that saved Groupon.

April 16 2012 at 6:04 PM Report abuse rate up rate down Reply