October 8, 2018

Groupon's Andrew Mason: Pt. 2, The Fall

by Without Fail

When we left off last episode, Groupon had gone from an idea to a worldwide phenomenon. It had thousands of employees, 100’s of millions in monthly revenue. And Andrew Mason had gone from a grad student to a world famous CEO. In the final part of this conversation, Andrew talks with Alex about when Google offered five billion dollars for his company and why he said no. Two years later, he was fired from Groupon.


You can read Andrew’s goodbye letter in its entirety here.

This is the second-part of a two-part interview. You may want to listen to part one first.


Without Fail is hosted by Alex Blumberg. It is produced by Sarah Platt and edited by Alex Blumberg, Devon Taylor and Nazanin Rafsanjani. Special thanks to Ben Bergman.


Peter Leonard mixed the episode. Music by Bobby Lord.


Transcript

Welcome to Without Fail, I’m your host Alex Blumberg. This is the show where I talk with entrepreneurs, artists, athletes, visionaries of all kinds -- about their successes...their failures, and what they learned from both.


And we’re back with the second part of my conversation with Andrew Mason, the founder of Groupon.


If you haven’t heard the first part, it might make sense to go and listen to that one first. Or, if you’re like, I don’t care about your chronology, Mr. Tied to the Time Space Continuum, I’ll listen to part 2 first, that’s fine too. You do you.


Anyway, we pick up this second part of the interview at the end of year two of Groupon’s existence. The company had gone from an idea to a worldwide phenomenon. With thousands of employees, 100’s of millions in monthly revenue. And Andrew had gone from a grad student who wasn’t sure what he wanted to do with his life, to a world Famous CEO. 


That’s where we’ll pick up the second half of this conversation with Andrew Mason. And one quick warning -- there is some strong language in this episode.


Andrew: There was a period for Groupon where we we almost sold the company and it started with an offer from Yahoo. Groupon was going gangbusters at this time like the thing was growing like crazy it seemed like there was no end in sight. This would have been like summer 2010 we were doing so. 


Alex: Two years after you launched the company


Andrew: Yeah we were doing over a billion dollars topline. 


Alex: Okay.


Andrew: And and just growing super fast, just this rocket ship ride and then all of a sudden we get that we have to contend with this oh Yahoo wants to buy you. And to me that was just the least attractive idea in the world. And I wasn't...I mean I was thinking about wanting to build a company that was going to live on for generations and be an American treasure. (LAUGHTER)


Andrew: So yeah, so we got this offer, I wanted nothing to do with it in part because the company was going well and I think the offer was something it started out something in the order of two or three billion. You know I like I think we thought that it could be a bigger business at the time. But there is something safe about just getting out.


Alex: How much did the money play into it. Like you. You became phenomenally wealthy and like had a chance for like bigger and bigger wealth. How much do you think about that? 


Andrew: For me, you know I asked, when the company was big enough I got a financial adviser and I said hey what's the amount of money that I need to make that I don't need to think about money anymore. And he said 15 million dollars or something like that. And so as long as that's kind of what I always thought I was like. Well as long as I'm north of that then who cares right. In terms of that being Yeah. Like how personally how much money do I personally need. 


Alex: And like once you've cleared 15 which is an extraordinary sum for anybody and I'm sure for you as well. You're like OK. Anything beyond that it doesn't really matter. 

    

Andrew: Yeah it was no. So once I got beyond that when I was thinking about do I do it or do I not do it. I mean I was thinking about the value of the company and creating shareholder value and all that stuff for sure. But it was never getting back to how is this going to affect my personal wealth.


And it just it was just not an inspiring idea. But we had to consider it and take it seriously the board wanted to take it seriously. The head of Corp Dev from Yahoo came to Chicago and met with us and I went to meet with him. I went out to dinner with him and I remember just being so depressed about going to this dinner and meeting with this Corp Dev guy. 


Andrew: And I had been vegetarian at that point for about ten years and without even thinking about it it came time to order. And I was like I'll have a steak because I felt at that that is like the moment where my principles I just stopped having principles. There was actually a moment. (LAUGHTER) 


Alex: And, and what did selling the Yahoo represent exactly? 


Andrew: It... really what it represented.. I mean I just looked at these other companies and it was just kind of this graveyard for for cool companies. So that's what we were, that's what we were afraid of. I just didn't want that. I wanted the thing to be successful and as big as we wanted it to be, right? And with this being my first time all I saw were all of those examples of that not being the case and and being afraid that that would happen to us. 


Alex: It's interesting because I think I'm filtering everything through because I'm a selfish bastard like we all are. I'm filtering everything you're saying through my own experience. And one like you started out with this idea of like here's what we're going to do and it's a sort of grand plan and then that idea meets the market and the market wants things that you don't want. Like I want I want to be true to some vision that I have. But at the same time I want to grow the company and be really successful. And it's this constant tension between like you you can't just be like I will be true to my inner inner value system entirely. But then there's this period where it feels like OK now I'm just going to like, fuck it I've become a hack. And I will do I'm a whore to the market essentially. And it sounds like this was sort of like that moment for you where you were sort of like if we sell to Yahoo. That's that I've just gone to the dark side? 


Andrew: Yeah the the process of growing a company is kind of like a process of having principles methodically beaten out of you. (LAUGHTER) You know the the 18 year old version of myself was listening to Fugazi and and really had strong opinions about the way that the world was supposed to be and the way the world was not supposed to be and everything becomes a lot more gray. Once you actually go through an experience like this and it's actually the nuanced understanding of the world is the most beautiful thing that as a human being I took away from my group on experience, is just realizing how little can be explained by for example people or organizations being evil crazy or stupid.

 

Andrew: So yeah...Yahoo. This corp dev guy was one of these moments where I was just like well if I'm going to sell to Yahoo I'm going to do it eating steak like this is it. You know if I'm going to solve a Yahoo. Like what's the point in having values or believing in things.


Alex: So you get the offer from Yahoo. You eat your steak. What happened.


Andrew: Okay so while the Yahoo thing was happening, we reached out to Google and said hey we have an offer from from from Yahoo. Are you guys interested. And then we started talking to them and we got very close.


Andrew: But then what was happening is we were literally at the peak of our of our hypergrowth where when it came time for the board to meet and discuss it we looked at we looked at our numbers and we were just growing faster than ever and we looked at the offer we were getting from Google and Google seemed like it could have been a great home in a lot of ways but we just felt like it was fun to do a independent company and we thought we could make more money doing it that way. 


<<Internet coupon site Groupon turned down a multi-billion dollar offer from Google...>>


Alex:  You're not going to be acquired by Google. You're going to become Google essentially, become something similar. 


Andrew: Yeah yeah like we we saw ourselves as wanting to reach that upper echelon of technology companies and turn into something that was one of the Internet treasures as our COO was fond of saying.


After this break...what turning down a 5 billion dollar offer has to do with yoga balls. That’s after these words from our sponsors.


<BREAK>


Welcome back to Without Fail and my conversation with Groupon founder Andrew Mason, at this part in the conversation Andrew has just decided to say no to a multi-billion dollar acquisition offer from Google:  


Alex: It's interesting to me at this point you're still like you are at this point four years away from music major public policy nerd and I would imagine that the music major public policy nerd if somebody said hey, I'm going to, you one day are going to turn down..what was it 6 billion dollars?


Andrew:  6, 5, closer to 5.


Alex: 5 billion dollar offer to acquire this company that you haven't started yet. That music major would have been like no I'm not sure. Did you think about that at that time?


Andrew: When we were making that decision it was me and the board and many people in the board were investors that's why they were members of the board. And we're sitting in a room talking about do we do it do we not do it. And I remember making what I thought was a very good point which is to say well look guys like here we are they're offering about 5 billion dollars. What's the worst case here. Let's say we turn it down. We keep going and the company tanks it it ends up being worth a billion dollars. That's still like we're still going to make a lot of money based off of that. Look that's still great right. Yes. They kind of like shook their head and we're like Andrew that's not the way that this works. That's what they said. (LAUGHTER) That's not the way that this works...


Alex: So you passed. Did you how did you feel about that decision. 

    

Andrew: Great yeah. I mean it was it was a hard decision but but it was energizing to decide to cast these guys off and go at it alone. 


Alex: And then what happened?


Andrew: We had a like there had been all these rumors in the press and nobody in the company knew what was going on. We had we had our kind of annual end of the year all hands meeting where everybody in Chicago like 500 or more people are all in the in a theater. And we give the all hands presentation and everybody from all the other offices are dialing in. So we thought we were going to be acquired by Google and we thought we were going to announce it at this all hands meeting. So what we ended up doing was we bought 500 like big huge Yoga balls that we were going to give to all the employees on the day as if it was a gift from Google because Google like had this reputation as being the place where they had yoga ball. That was basically like what we knew about Google. And so and so we had all these huge yoga balls and nothing to do with them and because we weren't selling the company. 


Andrew: I came up on stage and I said hey guys I have some really exciting news. We've been acquired by Yahoo and Yahoo CEO Carol Bartz and we hired an actor to play Carol Bartz and she was far enough away that nobody could really tell. And she comes out on stage and people are kind of like clapping in a semi shocked way. And she goes oh she had a reputation for swearing a lot. So this actress goes what's up fucktards really excited to have you as part of the team. I'm going to get some pizza. I can fit four. Who's with me. And then she walked off stage. 


And then I came back and I was like just kidding. And we had to figure out what to do with these yoga balls and so we said hey we have a gift from from from Salesforce because we're a big Salesforce customer and they sent us a Christmas gift and we played this video of Aaron on our team dressed up as a fake CEO of Salesforce and he sings this Salesforce balls, Salesforce balls, everybody get your Salesforce balls and it lasted 20 minutes, was 20 minutes song of him singing that while we passed out these giant yoga balls to everybody in the auditorium. And then and then that was it. I don't know why we did that. (LAUGHTER)


Alex: That is so funny that is so funny. What people did..and in this meeting with the balls you're telling. Did you also say like by the way we're not going to get acquired and we’re. 


Andrew: Yeah we're shooting for the moon. And the board who is happy, who is like OK we're not going to get acquired. I'm looking at these numbers. This looks great. But but we've got to go public. 


Alex: Cause just remaining a gigantic private company seemed impossible. 


Andrew: You have to go public at some point 


Alex: To get the shareholders paid back. 


Andrew: Yeah exactly like the way that we were structured and the way that we had raised money. We were just engineered in a way that that was if we weren't going to get acquired that was the only exit option for us. 


Alex: Right. How long was it before you eventually did go public. 


Andrew: so we passed on Google in December of 2010. And we went public in October of 2011. 


Alex: Oh wow. So just a year later. 


Andrew: Yeah. 


Alex: What did it feel like to finally go public. Did it feel any kind of way. Was it like a—


Andrew: Yeah. Going public I think we when you go public you go through I think a 90 day quiet period during which you're pretty limited from being able to say much about the company or defend the company in any way publicly. And and and that was like this crazy hazing for us. Before then we were the darlings of the Internet. There had been very little negative press about about Groupon and everything was just going swimmingly and then we entered this quiet period and we just got hammered. 


<<NEWS TAPE:

What raised eyebrows were accounting practices that made marketing costs disappear… 

...Groupon, they’re counting their revenue twice...

...It’s a scam. They’re playing every game in the book..

...Groupon is a hit and run..

...It’s going to be a circus. We’re dealing with instant art history here. The company has not been around long enough to be seasoned..>>


ANDREW: and the quiet period does this weird thing where it trains you on how to just suck it up and not respond when people are being critical. So that quiet period was really difficult to the point that when we went public I just I remember just being like bitter and mad like there'd be there was there was press there in New York and like trying to interview us. And I would just ignore them and just wanted nothing to do right with those people and so it was like this situation where it had turned the overall tenor it turned from this like intense but wonderful ride to this kind of like embattled highly stressful fight. 


Alex: And how did that manifest in the way you felt about the company and ran the company?


Andrew: Well it became a it became a huge distraction. So I mean the problem if you're going to be a public company you have to be able to accurately. I also want to make it clear that I totally take responsibility for everything that happened. So none of this is meant to be passing the buck in any way. Like I'm the one that made all these decisions so it's totally it's totally on me. We were dealing with so much criticism


<<NEWS TAPE:

...worst CEO of 2012? Who is it? This year’s winner is the most obvious. Andrew Mason. Of Groupon. An overhyped IPO…

...Groupon stock took another dip in early morning trading..

…questions persist about the company, about its business model and the staying power of that tech sector...>> 


Andrew:  Like the guidance that you get from people who are taking companies public. They'll say oh you just ignore it ignore the stock price blah blah blah. Well you can ignore the stock price all you want your employees are going to be paying a ton of attention to the stock price. There are going to be paying attention to all the press so even if you're not reading it right. They are and it's going to affect their morale. It's going to affect whether they decide to stay at the company or leave the company. It's not something that you can just ignore. 


Andrew: So it got to a situation very quickly where me and my executive team like 50 percent of our time was spent doing things that had nothing to do with building a great company and they had everything to do with managing things that were just unique to the situation to this one decision or fall out of this one decision to go public. And we weren't ready for it. And it just became chaos and caught up with us in a way that we weren't fully expecting. So you know, that went on for a couple of quarters and then and then I got fired in the beginning of 2013. 


After the break..what it’s like to be the CEO of the fastest growing company in history. And get fired.


<<BREAK>>


Welcome back to Without Fail and my conversation with Groupon founder Andrew Mason. 


Alex: How did you get fired? 


Andrew: So a couple of members of the board had been agitating to get me replaced in like October 2012 and I didn't want to go. We had a board meeting for our kind of like. Q You know end of Q3 board meeting in October so and the board decided Okay Andrew you get you get one more chance here like deliver a great Q4. And let's take it from there. But we still believe in you. Two weeks later we, me and my CFO, were in Barcelona meeting with some investors when we get a call from our Controller in France that they had forgotten to accrue a profit sharing tax and we just lost 10 million dollars. So that was it. Like we missed our numbers like we found out two weeks later had nothing to do. We had tried to set very conservative guidance that we would be able to crush and really come out the other side good. But that was the end. And at that point I called the executive recruiter that we had worked with and I said hey like how can we. I wanted to try to recruit a great CEO. 


Alex: Cause you knew at that point 


Andrew: That I was not going to survive. So I talked to this executive recruiter about starting a process. Wasn't talking to the board about any of this. And I came to the board meeting with this plan in place saying we're going to hire this CEO when he comes in I'll step aside very peacefully. And they're like No we've got to let you go today. It was just me and two board members who were friendly nice people and so on. The two board members told me No we got to let you go today and we're going to put in these other two board members as co-CEOs and I didn't feel like that was the right decision. 


Andrew: I said if you guys want to make that decision you can but you'll have to fire me and they said don't make us fire you. You know step aside and you're going to regret it for the rest of your life if you make us fire you just step aside. You say that blah blah blah whatever people typically say. And I said no because it's not true. Because if this is the decision you're going to make you have to fire me and I don't want to I don't want to have a story out there that's not believable or not true. So that's what happened. 


Alex: What were the feelings at when they said you're fired. Was given the range of feeling. What was the primary feeling. What were the sort of underlying feelings? 


Andrew: I was sad I was crying. I remember I was crying. 

    

Alex: Out of anger out of sadness? 


Andrew: I mean it had just been nonstop for however long it had been five or six years it had just been nonstop and it was all it was over. Right at that point it was over and I was worried about the company I was worried about my team I was just worried about well I was worried about what would happen. But I think it was just like you know in some ways a catharsis to it wasn't. You know once the company was public I didn't enjoy it. I'm much happier now that I'm not there that said if I was ported back today into that same decision that same moment and they said do you want to give it another shot or do you want to do it another way. I would have kept going just out of a sense of responsibility to the company. 

  

Alex: One of the things like when I first met you. Full disclosure you are a early investor in Gimlet Media. And one of them when I first met you. One of the things that everybody said about you was like oh you have to read his I got fired letter. Can I just ask you for people who haven't read it. Can you just read the first paragraph of it? Is that all right? 


Andrew: Sure. After four and a half intense and wonderful years as CEO of Groupon I've decided that I'd like to spend more time with my family. Just kidding. I was fired today. If you're wondering why you haven't been paying attention from controversial metrics in our S-1 to material weakness to two quarters of missing our own expectations in a stock price that's hovering around one quarter of our listing price. The events of the last year and a half speak for themselves. As CEO I am accountable. 


Alex: It's very funny. It's very honest. It doesn't it doesn't sound defensive at all. Like it takes very full. Like it sounds like you're fully owning the performance of the company. But it also is so interesting because it's like one of those times where it's sort of the strikes me as the opposite of the of the Yahoo dinner.


Andrew: Say more.


Alex:  There was an opportunity to... like you. You were like no I'm not going to...You took a stand on principle which is like I'm going to make you guys fire me. 


Andrew: I guess I don't totally see it that way. The to me. To me the alternative of getting fired. Like I just would watch these CEOs resign in tumult. Where everybody knew they were fired and yet they still felt the need to put up this facade as if they were it was their own choice. I just didn't want to live with that for the rest of my life. You know I didn't want to I didn't want to have to introduce myself to someone and have them know that they're thinking that I'm this liar. 


Alex: We both have to believe this lie right. 


Andrew: Yeah exactly. So I just wanted to I just wanted to get it out there. 


Alex: So they said that if you if you make them fire you will regret it for the rest of your life. Was that correct.


Andrew: No 


Alex: The opposite. It sounds like it's the opposite. You're happy about this letter. 


Andrew: I'm happy about it. Like I'm not sure that I'm happy that it's like the thing that I'm best known for. 


Alex: I wouldn't say something you're best known for. 


Andrew: Yeah. Like people will meet me and like I loved your your loved your letter or whatever you're getting. I wish people were more like I love that you. You know built this great company. 


Alex: Yeah there's, you wrote in the third paragraph I'm okay with having failed at this part of the journey I'm terribly proud of what we created. And you said if Groupon was Battletoads it would be like I made it all the way to the Terra Tubes without dying on my first ever play through. 


Andrew: Yeah. 


Alex: What? 


Andrew: Have you played Battletoads?


Alex: No.


Andrew: It's a Nintendo game that it's hard right. Yeah. So I mean 


Alex: Like taking your company public is hard. 


Andrew: Yeah I mean the point I was making there is like look I feel I feel ok with this. I don't know what the end is that everybody else is expecting or what success looks like that you're ultimately like deified and you know you rise into CEO heaven. But for me like this is more than I ever expected it was. It was a pretty good, it was a pretty good run. And I'm I'm proud of a lot of what we did. 


Alex: There was one other part of this letter that says my biggest regrets are the moments that I let a lack of data override my intuition on what's best for our company customers. What do you mean. What did you mean by that? 


Andrew: You know Groupon kind of we started out with these really tight principles about how the site was going to work and really being pro customer and and as we expanded and as we went after growth at various points people in the company would say hey why don't we try running two deals a day. Why don't we start sending two emails a day. And I think that sounds awful like who wants that. Who wants to get two emails every single day from a company. And they'd be like well sure it sounds awful to you. But we're data driven company why don't we let the data decide. Why don't we do a test. At some point I'd get worn down to this argument of OK yes if we're a data driven company then we should go ahead and we should do a test and that's true and the data will will speak for itself. And we do a test and it would show that in this example maybe people would unsubscribe at a slightly higher rate but the increase in purchasing would more than make up for it and you'd get in a situation it's like OK I guess we can do this it doesn't feel doesn't feel right but it does seem like a rational decision. Right. And of course the problem was you know when you're when you're growing when you're in hypergrowth like this a lot of times you don't have time to see what is going to happen to the data in the long term. The churn would catch up with you. And people would people would unsubscribe at higher rates and then you know before you know the service has just turned into something you know if you look at Groupon now it's just this kind of vestige of what it once was. There's no real copywriting. It's a marketplace of coupons. You know it's I mean it's still a service that a lot of people get a lot of value out of but it doesn't have the spirit that it once did. And I think was maybe had something to do with the success that we had early on and end. And so I just feel like those decisions it's kind of like death by a thousand cuts. Where there are certain things you have to be religious about in the company you have to just say that's what I've taken away from that is there are some things where it's like I'm sorry I'm not going to look at the data on that I'm sorry. This is just what we're going to do. And we know that it's we know that it's right and there's nothing that's going to shake us from that. So that's kind of where it is. 


Alex: See OK what I hear you saying that and I'm just like every part of me is like yes yes yes. Because my entire life up until starting this company like for most of my life I was like making stories right like I was a journalist and I was like a creative professional I guess for lack of a better word. And every decision was based on my gut. Basically it was like aesthetic decisions. Then I played with people and they'd be like I think this is then you'd sort of like you negotiate that but it wasn't like everything that I was doing was based on sort of like an internal compass of like what feels right and then you get to this thing where like you're trying to like make stuff for lots of people maybe who don't feel the same way about things that you do or maybe have different preferences than you do. And I got very confused about like how much or how little I should listen to that and also like sometimes your gut leads you astray but sometimes you your gut is like a collection of blindspots you know. So that's just like a don't know. Like when when do you trust your gut and when if you've got a bunch of people saying like your gut is wrong and I have a different gut. Like when do you believe those people do you know what I mean. 


Andrew: Yeah. 


Alex: What's the answer Andrew 


Andrew: I don’t know what the answer to that is. 


Alex: I wish there were an answer.


Andrew: I'm I'm I'm mostly just listening to you talk and thinking man I'm glad to not be doing that anymore. (LAUGHTER) 


These days, Andrew is doing some of that. He’s still a CEO, just of a much smaller company, 10 people. It’s called Descript, and it makes software that transcribes and edits spoken word audio.


Next episode of Without Fail -- Sophia Amoruso, founder of Girlboss, and Nasty Gal…a company that she started by herself and grew into a 300 person retail empire, valued at 350 million dollars. Until it all fell apart:


<<SOPHIA: I wrote this book Girlboss and I put myself on the cover and I was like yeah, I did it. And then by the end of that year, we had started laying people off. And it was just like, oh my god, what is this? 


That’s next episode of Without Fail.


Without Fail is hosted by me and produced by Sarah Platt. It is edited by Devon Taylor, Nazanin Rafsanjani and me. 


Special thanks to Ben Bergman.


This episode was mixed by Peter Leonard.


Music by Bobby Lord. 


If you haven’t already, subscribe to Without Fail on Apple podcasts or wherever you listen. Leave us a review! It really does help. And thanks for listening.

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