Founder, CEO faces new questions about his ability to lead daily deals company after two years of missteps
In June 2011, Groupon Inc. Chief Executive Andrew Mason took the stage at a conference hosted by influential technology blog AllThingsD.
When co-executive editor Kara Swisher asked him whether an initial public offering was coming soon, he shot her what she later dubbed his “death stare.”
The audience laughed and broke into applause.
The tone was decidedly more subdued last week, when Mason found himself at another tech industry confab, fielding questions from Business Insider’s Henry Blodget, this time about whether Groupon’s directors were going to fire him at their meeting the next day. AllThingsD had reported a day earlier, citing anonymous sources, that Groupon’s board of directors was considering replacing Mason with a more experienced CEO to lead the Chicago-based daily deal company’s turnaround.
The contrast between those two appearances underscores the swift and dramatic tumble of Mason’s standing in tech and business circles within a few years. The young founder and CEO graced the cover of Forbes in 2010 and was named Ernst & Young’s National Entrepreneur of the Year in the “emerging” category a year later.
Those accolades are a far cry from the cloud hanging over Mason, 32, and the company he launched four years ago. The leak to AllThingsD appeared to be deliberately timed to embarrass the executive, forcing him to field questions about his own competence at a scheduled appearance. This public hint of internal strife has fueled speculation around Mason’s fate even as other public tech companies, such as Facebook and social game-maker Zynga, have also seen their stock prices drop since their IPOs.
Groupon’s board met Thursday and took no action on the CEO’s job, with company spokesman Paul Taaffe saying the board and management were “working together with their heads down to achieve Groupon’s objectives.”
Markets, however, seemed unconvinced. Groupon’s beleaguered stock closed slightly higher Thursday but dropped 8.7 percent to $4.14 Friday. Shares debuted at $20 in November 2011.
Investors “want experience in leadership,” said Raman Chadha, a clinical professor at DePaul University and co-founder of the Junto Institute for Entrepreneurial Leadership, a training program for startup founders. “And as a result, where Andrew’s background was cool and sexy — and maybe even bordering on amusing — when Groupon was a pure startup, that’s in the mindset of those of us who are observers and supporters … and fellow entrepreneurs. I think in the minds of the investor community and Wall Street, (it’s different) because now the company has a lot more to lose. And if it’s going to fall, it’s going to fall really hard and really far.”
For Chadha, Mason’s unconventional pedigree as a music major-turned-startup-founder was part of the appealing, media-friendly story of Groupon’s origin. The company was launched as recession-weary consumers were eager for deals, and it achieved rapid growth while earning a reputation for antics like decorating a conference room in the style of a fictional, possibly deranged tenant of Groupon’s headquarters who had lived there before the startup moved into the offices.
The scrutiny of Groupon was tremendous given the “high-flying” nature of the company, said David Larcker, a corporate governance expert at the Stanford Graduate School of Business.
“You have a founder as CEO,” he said. “He’s the public face of the company. He has set the culture. All of that stuff.”
That culture, driven in large part by Mason, turned from a lovable quirk to a major liability as the company ran into controversy over its poorly received Super Bowl ads in February 2011 and a series of missteps in the run-up to its IPO. Then, within months of its public debut, it disclosed an accounting flaw that forced it to restate financial results.
The larger question surrounding Groupon is the long-term viability of its basic business model. The company has been expanding offerings beyond its core daily deals, which have seen growth rates tail off. It’s also dealing with a recession in the key European market as well as continued competition in the U.S.
But the biggest challenge facing Mason now is probably his own performance, or rather the perception that he isn’t up to the task of running the global, publicly traded business worth billions that he founded but that now needs a turnaround. The stock is down 80 percent from its IPO price.
“It’s an oft-told, oft-expected story that the genius entrepreneur steps aside when he or she succeeds at building a company big enough to need an experienced CEO,” said Erik Gordon, a business professor at the University of Michigan.
The example Gordon and others cite is Google, which flourished after its co-founders Larry Page and Sergey Brin made way for a more seasoned executive in Eric Schmidt.
“The Google guys did it, and the results were spectacular,” Gordon said.
Chadha said many startups tend to become more corporate in outlook, and less quirky, as they grow, because they bring in experienced executives from large companies that may have difficulty adapting to an entrepreneurial culture or reject it outright as not professional enough.
“I think that’s where Google is very different,” Chadha said. “(The company) sought out entrepreneurial, startup types — people that became part of their management team.” That free-form element of Google’s culture comes out in such things as the Google doodles — the offbeat tributes to notable anniversaries or famous people that pop up on the main search page.
Mason has acknowledged areas where Groupon needs to improve and has hired senior executives with experience at more mature tech companies. That hasn’t always worked either. Margo Georgiadis, who came from Google as chief operating officer, returned to that company after five months.
Whether there’s still room for Mason on the top management team remains to be seen. He was direct in his interview last week with Blodget, offering a minimum of jokes as he focused on discussing the job he and others at Groupon must accomplish.
“I care far more about the success of the business than I care about my role as CEO,” he said.
A year ago, when he spoke to author Frank Sennett for his book “Groupon’s Biggest Deal Ever,” Mason was unapologetic about his management style.
“You only live once, and all I’m doing is being myself,” he told Sennett. “I think a normal CEO is trying to appear in some way that’s not actually them. That’s probably not what they’re like.”
In the same book, former President and Chief Operating Officer Rob Solomon offered this blunt assessment of his ex-boss: “Andrew at thirty-five and forty is going to hate Andrew at twenty-nine and thirty; I guarantee it.”
Andrew Mason’s tenure as Groupon’s CEO has
been marred by errors that have led some to
question his ability to lead the company.
(Brendan McDermid, Reuters Photo /
November 4, 2011)