Tech Report: Daily Deal Site Groupon Carrying Hefty Deficit

SAN FRANCISCO (KCBS) – Groupon may be one of the big names amongst the daily deal Web sites, but its latest quarterly report shows a deficit of more than $100 million.

KCBS Technology Analyst Larry Magid said they can’t seem to turn a profit, in large part, because it’s a very labor intensive business.

“They have a sales force of more than 4,800 sales representatives around the world, and that represents more than half of their payroll. So they’ve got a very large payroll,” he said.

KCBS’ Technology Analyst Larry Magid:

Magid added that Groupon’s sales force must beat the pavement like in the old days, knocking on doors and and trying to convince small businesses to sign up.

He said the trick will be for the company to scale down its workforce while turning a profit.

They can get all the revenue in the world, “but if they can’t get black in on their bottom line, then they’re not going to be able to stay in business,” said Magid.

(Copyright 2011 by CBS San Francisco. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)

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