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Acsoi - Land Grab Economics

"Adjusted Consolidated Segment Operating Income" (Acsoi), is a measure of what a companies profits would be if they were not spending like crazy to acquire a space:  in GroupOn's case, this would be retailers.

To me, using Acsoi as a measure is really an admission that a company has no staying power beyond brand awareness.  So, they need to grab and own as much mindshare as they can, as quickly as they can, to increase the barrier to entry for competitors.  Without intellectual property to help protect them, and with the cost of switching (for a user) being effectively zero, building a global brand, and relying on brand stickiness, is the best way forward.

Companies like Amazon that have been effective at this have also built in other "sticky" factors over time: recommendation engines, one-click purchasing, etc.  This increases the cost for the user to switch, and allows the company to stop pouring money into marketing and acquisition costs.  You also build up a trust relationship with a company that sends you physical goods (Amazon, Apple) that increases your loyalty.  When the product is an electronic coupon, and the value to you is transactional, you will not be as loyal.

So, when looking at a company through an Acsoi lens, I would be looking for the time-horizon to stickiness.  When the product being sold is 100% digital, I believe the time-horizon is going to be longer.    If a new email shows up tomorrow with a better coupon than GroupOn is offering, I will use it.  I don't feel any loyalty to GroupOn.  If GroupOn does not add any compelling sticky features, their Ascoi time-horizon will always be too far out, and they will continue to spend like crazy; once they stop spending, revenue will fall, and they will fall out of favor with the financial markets.  Right now they appear to be a hampster on a wheel.

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