Desperate Groupon Tries to Fix Finances with Consumer Privacy

If one thing was evident from its IPO filing, it was that Groupon has a genius for spending and losing money. In fact, the company so excels at these activities that it had to invent its own twisted accounting to pretend to have made money.

But ever since Zynga showed that really profitable companies can file for an IPO, Groupon has been in trouble. The glad handing and fancy numeric footwork may look good on the surface, but they don't explain away the massive losses. Not to fear. Groupon may have found a solution. It changed its privacy policy to collect a lot more personal and location information -- the last resort of the income-strapped Internet wunderkind.

Groupon apparently emailed tens of millions of customers to tell them about the expanded collection of personal information. It has broadened the definition of personal information to include more of the details that advertisers crave. Here's some of the data the company collects:

• contact information, including email address, phone, postal address, and social media website account names
• relationship information, which includes lifestyle and demographic information and going into Facebook Connect to pull up any social interactions
• mobile location information

This is all gold to marketers. Groupon plans to share the information with both merchants to the extent customers have redeemed deals as well as business partners. And then, as the company explicitly says:

We encourage Groupon Merchants and business partners to adopt and post privacy policies. However, the use of your Personal Information by such parties is governed by the privacy policies of such parties and is not subject to our control.

In other words, there is no way to know what companies will do with the personal information, let alone a guaranteed production for how the information will be stored and used.

It's not surprising. Groupon has to figure out a way to make eventually make money. Given the likely downward pressure on its part of deal revenue and the difficulty in constantly replacing the many local merchants who try the service only once, more revenue is necessary. The question is now when, not if, regulators will start watching the company, giving it yet another thing to be concerned about.

Related:

• 4 Reasons Groupon is Like Goldman Sachs and 1 Reason It's Not
• Groupon Loses So Much Money, It Needs Its Own Daily Deals
• Groupon IPO: Its "Income" Is Dependent on Dodgy Accounting
• Zynga IPO: Real Profit Puts Zing in Its Public Offering
• Groupon and LivingSocial: The Next Bubble Waiting to Pop

Image: Flickr user twicepix, CC 2.0. Erik Sherman

Erik Sherman is a widely published writer and editor who also does select ghosting and corporate work. The views expressed in this column belong to Sherman and do not represent the views of CBS Interactive. Follow him on Twitter at @ErikSherman or on Facebook.

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