10 Ways to Turn Around Groupon

NEW YORK (TheStreet) -- Groupon (GRPN) fired CEO Andrew Mason on Thursday afternoon.

Mason said he's leaving because he's become a distraction for the company as it continues its turnaround. I'm not sure I buy that, as people will continue to have questions about Groupon until it shows it has truly turned itself around.

But how can it turn itself around? I actually think the road map is pretty clear (and it's something that Mason has been hard at work on for the last six months if not longer in some cases).

1. Keep Daily Deals Going as Much as You Can



The company has rightly pointed out that it's gone quickly from a site that was 100% focused on once a day emails to customers to several other offerings. However, just like companies like Yahoo ( YHOO) and Facebook ( FB) are having to adjust their businesses for the rapid shift to mobile, they also have to keep their mature cash cow businesses going for as long as they can. And Groupon is in exactly the same boat with daily deals. That is still the biggest part of their business. They have to keep it going and actually start growing it as fast as they can.

2. Better Customization and Personalization

The running joke for some time about Groupon is how useless the daily deals are for most of us. "Why do I want to get another offer for a local mani/pedi?" would be a familiar groan from male friends of mine. Yet, this is still largely what goes on at Groupon today, despite management assurances that this is slowly changing with better technology. It's still largely a mass market email dump once a day today.

3. Whack Headcount

The company has 10,000 employees. Most of them are tied to sales and paid on commission. The company, over the last year, has persistently reeled in marketing expenses while still keeping revenue up. It's likely that there's a lot more fat to trim that a new outsider will go after -- especially in Europe.

4. Fix Europe

Speaking of Europe, Groupon's got to fix it. It's a hole in the bottom of the ship that just keeps losing water. New COO Kal Raman has been given the task of fixing Europe with the North American playbook last quarter. Most (including me) expected to see him start to deliver results in the fourth quarter. Unfortunately, it's just taking longer to fix. One would think that Groupon would be ideally suited to mete out bargains to Europeans going through an economic crisis. Yet, they've missed the boat to this point.

5. Make Groupon Now the Star Attraction

The future of Groupon is probably Groupon Now. I'm walking around my neighborhood and I want to know about deals available just for me instantaneously. I want a coffee and this local coffee shop will offer me a cappuccino and muffin for $2 vs. me continuing to drive and find the next Starbucks ( SBUX). For that to happen, I have to know an app to look for in the moment that can tell me about that particular deal and local merchants have to have a way to find me in that app. That's where a Groupon can come in with its Groupon Now product. However, that vision is still far from reality. Yet, more than 40% of Groupon's users are on a mobile device. The potential is there. Groupon just has to execute.

6. Buy Foursquare

Groupon's stock is in the tank these days, so it doesn't have the currency it did when it was above $20. It has cash but not an infinite amount, especially considering it's in a turnaround phase. Yet, its Groupon Now product could greatly benefit from it buying Foursquare which is just now starting to expand into the local deal space. Foursquare is private and had been rumored to be talking to Apple ( AAPL) of late. Groupon probably worries that, if it pursued Foursquare, a bigger buyer would swoop in. But Foursquare would be a great fit.

7. Show Revenue Growth Again

Wall Street is a fickle bunch. Show hockey stick growth and everyone loves you. Show slowing growth and your stock gets crushed. But when Facebook started to show revenue growth again, Wall Street was quick to come back in the fold and the same would be true now for Groupon.

8. Articulate How You Win with Goods

There is still a lot of concern about Goods and if that business, despite its growth, will drag down earnings or require huge investment in distribution centers to compete directly with Amazon ( AMZN). Groupon has tried for two earnings calls now to say they wouldn't out-Amazon Amazon, but have failed to say what that means and where Goods is going. How is it distinct from Amazon or others? Where does it fit within Groupon and how does Groupon win with it?

9. Put the Control Issues Behind You

There remain lots of questions hanging over the company about proper financial controls. These simply must be put behind the company. CFO Jason Child can't do this himself. He'll need the help of the next CEO.

10. Hire a 'Wise' CEO Who Is Trusted

The next CEO must engender confidence among investors. He or she doesn't have to be old, but they must be wise. They must send a clear signal that someone talented sees the opportunity at Groupon and will "fix" Groupon to properly address that massive opportunity. This will help investors believe again in the story that they originally fell in love with.

However, with all this said, there might never be another CEO for Groupon. Andrew Mason as CEO wasn't holding this company back. He wasn't a distraction to Groupon employees from delivering.

Therefore, why did Mason leave? I think it's because, by announcing Eric Lefkofsky and Ted Leonsis as interim co-CEOs, I think Groupon put itself on the block today.

I think that announcement was code for "Hey, Google and Yahoo, would you pretty please reconsider making an offer for our company?"

Lefkofsky has shown that he wants to win and go for a big payday but he's also eminently practical. I don't think he'd care a whit about selling his company at the bottom if he thought he could get his entire investment liquid immediately. I think Brad Keywell would be in the same boat. I also think a guy like Ted Leonsis would love to just move on from the company, even if he felt he was leaving some money on the table by selling the company to Google below their prior famous $6 billion price.

If there was a serious offer out there, I think Lefkofsky and Leonsis would listen. And then the buyer could worry about the turnaround of Groupon.

At the time of publication the author is long GRPN, AAPL and YHOO.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Eric Jackson is founder and Managing Member of Ironfire Capital and the general partner and investment manager of Ironfire Capital US Fund LP and Ironfire Capital International Fund, Ltd. In January 2007, Jackson started the world's first Internet-based campaign to increase shareholder value at Yahoo!, leading to a change in CEOs in 2007. He also spoke out in favor of Yahoo!'s accepting Microsoft's buyout offer in 2008. Global Proxy Watch named Jackson as one of its 10 "Stars" who positively influenced international corporate governance and shareowner value in 2007.

Prior to founding Ironfire Capital, Jackson was President and CEO of Jackson Leadership Systems, Inc., a leadership, strategy, and governance consulting firm. He completed his Ph.D. in the Management Department at the Columbia University Graduate School of Business in New York, with a specialization in Strategic Management and Corporate Governance, and holds a B.A. from McGill University.

He was previously Vice President of Strategy and Business Development at VoiceGenie Technologies, a software firm now owned by Alcatel-Lucent. In 2004, Jackson founded the Young Patrons' Circle at the Royal Ontario Museum in Toronto, which is now the second-largest social and philanthropic group of its kind in North America, raising $500,000 annually for the museum. You can follow Jackson on Twitter at www.twitter.com/ericjackson or @ericjackson.

You can contact Eric by emailing him at eric.jackson@thestreet.com.

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