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The real lesson of Groupon (NASDAQ:GRPN) is something that has been true since the Web was spun. People don't scale. Not like computers they don't.

The way to success in business is always through automation, doing more with fewer hands. We automated agriculture, we automated manufacturing, and when those gains became insufficient we automated the work of men's minds.

That's what the whole computer revolution is all about. That's what the Web was about. The Yahoo (NASDAQ:YHOO) directory didn't scale as well as a search engine could. No collection of web pages could scale the way Amazon.com (NASDAQ:AMZN) and its programming could. John Henry keeps fighting the automated nail driver, and he keeps losing.

Andrew Mason defied this. Since his idea was new -- deliver offers that would only become real after a certain number of people accepted them -- he had early success. But you still need people to sell merchants on the idea, and people to write up the offers.

By automating this process, by making it all self-service, it was obvious from the beginning that Groupon could be beaten. What's amazing is that it took so long, and that Mason never reacted to what would be a natural change in the market. Mason's firing was overdue.

The question is whether there is any value left in the shares, at all. Even at its current reduced price, shareholders are still paying $6 for each $1 GRPN generates. That's still close to the level of Facebook (NASDAQ:FB) and on par with what Google (NASDAQ:GOOG) shareholders are paying, and I'd say that both Google's and Facebook's prospects are much better.

By contrast, Microsoft (NASDAQ:MSFT) is selling at closer to three times its sales, and the ratio at Apple (NASDAQ:AAPL) is even lower. Even if you believe in the model that says making the whole thing self-service can generate additional revenue, I can't see paying more for Groupon's sales than those of Microsoft or Apple. Are their growth prospects really better?

So this remains a short. It will, at some point, become a bargain for someone. I don't know who, I don't know when, but at some point the name and the volume and the turnaround prospects will become irresistible to someone.

Source: The Lesson Of Groupon