Leonsis tapped to lead Groupon after shake-up


Leonsis, a major investor in Chicago-based Groupon, joins another investor, executive chairman Eric Lefkofsky, as co-chief executive, replacing the company’s controversial founder, Andrew Mason.
February 28, 2013

Washington mogul Ted Leonsis was named co-chief executive of Groupon, the troubled daily-deals Web site that fired its chief executive and founder Thursday after a string of disappointments culminated in a big earnings miss this week.

Leonsis, a major investor in Chicago-based Groupon, joins another investor, executive chairman Eric Lefkofsky, as co-chief executive, replacing the company’s controversial founder, Andrew Mason.

Mason, 32, issued a non-traditional letter following the action, in which he at first said he was leaving to spend more time with his family.

“Just kidding - I was fired today,” he said in his missive to the staff. “If you’re wondering why. . . you haven’t been paying attention.”

Groupon announced the change, including a search for a new chief executive, on Thursday after the stock market had closed.

Leonsis did not respond to e-mails and phone messages, but he said in a statement released by the company: “Groupon will continue to invest in growth, and we are confident that with our deep management team and market-leading position, the company is well positioned for the future.”

Groupon’s stock price was decimated after the company announced late Wednesday that its fourth-quarter loss had widened to $81.1 million from a $65 million loss the previous year.

Groupon shares dropped 20 percent Thursday, closing at $4.53. That price is down from $20 per share a year ago.

The shakeup caps more than a year of upheaval for Groupon and the daily-deals industry, which less than two years ago was considered as transformative to local commerce and entertainment as Amazon.com was to retail.

The daily-deals business got off to a fast start around 2010 as companies like LivingSocial and Groupon started peddling steep discounts to spas, restaurants and shops in subscribers’ neighborhoods.

But by 2012, that growth began to slow, in part because customers felt bombarded by e-mails from both the big sites as well as scores of copycats. Groupon and LivingSocial began searching for other revenue streams.

“Deals are a piece of the online promotions puzzle, but they sit alongside traditional things,” said Peter Krasilovsky, a daily-deals analyst with BIA/Kelsey in Chantilly. “They are not really a stand-alone entity as we thought. It’s not a new paradigm for advertising.”

Groupon’s fortunes are expected to have a significant effect on Washington-based LivingSocial, the No. 2 daily-deals company and Groupon’s chief rival. Privately held LivingSocial has closely watched Groupon’s progress.

A spokesman for LivingSocial declined to comment.

The two companies have much in common. Leonsis is one of the chief investors in Groupon, and his close friend and business partner, fellow Washingtonian Steve Case, was one of the early investors in LivingSocial.

Both continue to have significant stakes in the companies and are also partners in other investments through a local venture-capital fund called Revolution Ventures. Leonsis, 56, also sits on the board of directors of American Express and is the majority owner and chairman of Monumental Sports & Entertainment, the holding company that owns the Washington Wizards, the Capitals and the Verizon Center.

LivingSocial’s chief executive, Tim O’Shaughnessy, is the son-in-law of Washington Post Company Chairman Donald E. Graham.

Groupon was once named the fastest-growing company in history by Forbes magazine. But several high-profile missteps, including a lengthy and contentious initial public offering, restatements of earnings and high-level staff defections, damaged the company’s image.

Mason took responsibility for some those missteps Thursday.

“The events of the last year and a half speak for themselves,” he said in the letter. “As CEO, I am accountable.”

Mason, who had been seen as the creative force behind the company and still controls nearly 20 percent of Groupon’s voting stock, had drawn attention for his nontraditional approach to running a public company. He posted online videos of himself doing yoga in his underwear and posed for photos with cats on his head.

“Mason added very little value to a company which essentially became an online department store,” Krasilovsky said. “He was a lifestyle champion, and he started Groupon as something to help people figure out what they wanted to do on the weekends.”

Mason’s control of the company stemmed from his 20 percent share of the voting stock, which in addition to Lefkofsky’s shares and voting shares held by another key investor, Brad Keywell, amounted to a block 57 percent control. Lefkosky’s voting shares may have been instrumental in the executive leadership.

Mason acknowledged in his departing letter to employees that the company needed some change.

“You are doing amazing things at Groupon, and you deserve the outside world to give you a second chance. I’m getting in the way of that. A fresh CEO earns you that chance,” he wrote. “I’ll now take some time to decompress (FYI I’m looking for a good fat camp to lose my Groupon 40, if anyone has a suggestion), and then maybe I’ll figure out how to channel this experience into something productive.”

Staff writer Steven Overly contributed to this report.

Thomas Heath is a local business reporter and columnist, writing about entrepreneurs and various companies big and small in the Washington Metropolitan area. Previously, he wrote about the business of sports for The Post’s sports section for most of a decade.
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