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Groupon Could Challenge Google's Record IPO 245

jbrodkin writes "Months after spurning Google's $6 billion takeover bid, Groupon may topple Google's IPO record with an initial public offering worth $25 billion. Google went public in 2004 with a $24.6 billion valuation and Groupon seems to be on the verge of an IPO worth even more, Dow Jones VentureSource says. Even if Groupon doesn't break Google's record, it seems likely to become only the fifth venture-backed company to achieve a $10 billion valuation at the time of its IPO."
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Groupon Could Challenge Google's Record IPO

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  • Groupon (Score:4, Interesting)

    by viablos ( 2018696 ) on Friday March 18, 2011 @03:18PM (#35534698)
    Groupon has a great business idea, AND it's mainly targeted to girls and women who also spend a lot for beauty things. They make shitloads of money as well as does the partner companies and their users. Win-win-win.
    • Re:Groupon (Score:5, Insightful)

      by MetalliQaZ ( 539913 ) on Friday March 18, 2011 @03:24PM (#35534794)

      Actually users SPEND money. When advertisers say that you "save" money by taking advantage of a deal, they are altering reality. Saving money is the opposite of buying.

      Still, when used responsibly, it IS a win-win-win. I have used it to great effect.

      -d

      • Same thing happens on fast food. People end up paying more with the illusion of saving money buying big combos.
      • Obligatory XKCD:

        http://xkcd.com/870/ [xkcd.com]

      • >>>When advertisers say that you "save" money by taking advantage of a deal, they are altering reality.

        If you are buying something you need, like money, and the advertiser gives you 50% off, then you are indeed saving money. Unfortunately most people buy things they don't need (shoes, that "cute dress", games, and other crap). Which is why the average American household is $120,000 in debt.

        Plus another ~$140,000 national debt on top of it. The US is arguably the poorest first-world country - un

        • If you are buying something you need, like money, and the advertiser gives you 50% off, then you are indeed saving money.

          That's true. I spend at least half my income on money. But I never buy it at a discount store, because the quality just isn't there.

        • by Surt ( 22457 )

          Do you have a source for that 120k in debt stat? I can't believe that could be true unless they are counting a mortgage against you without giving you credit for the value of the house.

          • Forbes article 6/24/2010, probably elsewhere, too: http://blogs.forbes.com/moneybuilder/2010/06/24/one-big-difference-between-chinese-and-american-households-debt/ [forbes.com]

            It does include mortgage debt. Perhaps this will suit you better: U.S. household debt is 136% of income, in urban China it's 17%. Meanwhile, more urban Chinese own their own home (85% to 69%), and those who do are far more likely to do so outright (11% with mortgage vs. 70% in U.S.).

            • Debt vs. income isn't a very useful indicator of anything. Net worth is probably a better indicator of how well you are doing financially. I have 'debt' (just my mortgage) that is about 150% of my income. By the metric you show, I'm actually worse than average. However, my total assets are about four times my annual salary, i.e., I have way more money than debt.
        • by v1 ( 525388 )

          A common good rule of thumb is to only pay attention to coupons, discounts, and sales for things you were already going to buy. The best use of coupons and sales is to look for them after you already have figured out what you are buying, as a way to lower the cost you were already committing to. If you see a coupon or sale and then think to yourself, "Hmmm, should I buy that? It's such a good deal!" then you're a sucker.

          And that's what the companies want you to do, make an impulse buy from the lure of th

        • You're not poor until the debt comes due. And depending on the creditor, you simply walk away. Boom, clean balance sheet, as long as your assets aren't securing the debt.

      • by Firehed ( 942385 )

        Depends on your intentions. If you were going to buy it anyway at full price, then you are saving money - although obviously more in an opportunity cost sense than a savings account sense. If you wanted to buy it but weren't willing to pay the normal price, then you were just doing the free market thing. If you bought it simply because it was being sold at a discount, then I've got a piece of land in which you might be interested.

      • Occasionally they will have deals for things you would have bought anyways, and you end up paying less than you might have. It's still spending, but its a net savings, at least. The problem is, in that case, the business gains nothing. They aren't getting any new exposure or a customer out of it -- they're just basically giving a regular a discount for no real reason. This happens a lot and may be one of the reason why a large number of business that have offered Groupons have low satisfaction ratings w

        • True but if there are a number of providers for a single product. The seller who provides a discount through Groupon will win out over the competitors selling the same product.

      • That brings up rule #1 about deal hunting. It's only a good deal if you were already planning on buying it sooner or later.
      • Saving money is the opposite of buying.

        Um, no? Saving is the opposite of spending. If I was going to buy a product anyway any discount is money I get to keep. It only stops being savings when you buy something only because it's on sale.

      • Still, when used responsibly, it IS a win-win-win.

        If Groupon was only used responsibly their IPO would be worth - well, they probably wouldn't be worth an IPO.

        I don't see them as a company who will change the internet (like Google or Facebook). I wish them luck, but I wonder why anyone would think they are a good long-term investment.

        When someone offers you $6 billion dollars for your company you say 'yes!'

    • Re: (Score:2, Interesting)

      by Anonymous Coward

      According to the site, Groupon users have saved about $1.5 billion. With many offers being half price, Groupon's total turnover ever would also be about $1.5 billion. How is a company with a $1.5 billion all-time turnover worth $25 billion? Count me out.

      • I concur. I don't get this at all. I thought groupon was nuts not to take Google's offer, but this -- this is madness. They have a larger user base for sure, but their current business model does not support this valuation.

        • I thought groupon was nuts not to take Google's offer, but this -- this is madness. They have a larger user base for sure, but their current business model does not support this valuation.

          It'll be interesting to see what investors get burned by this. Facebook at least can keep trying to figure out how to monetize all it's users. Groupon? Anyone can do what they do. Your company only has value if only you can do what you do (copyright, patent, exclusive rights granted by the FDA, etc) or there is a high barrier to entry.

        • My reaction to Groupon has been "It's like a coupon, only much harder to use!"

          I don't know what fraction of the coupon value Groupon gets to keep. If it's 100%, $1.5B on $25B, that would be 6%, not a bad deal these days. But if they're only getting 10%, and spend half of it on advertising, that's 0.3% of a $25B valuation, or 1.25% of a $6B valuation, so that says that Google would have to be expecting significant growth to make their bid worthwhile, and the VCs must be hoping the IPO-buying public are re

      • by Zerth ( 26112 )

        In 2007, Groupon had 0 revenue. In 2010, they had ~760 million in revenue.

        I think you can see where that graph is going.

        http://xkcd.com/605/ [xkcd.com]

      • No, Groupon's turnover is the commission they make from the sale of each voucher, which I believe is about 30% or $450m.

    • It's a fail waiting to happen.
    • by garcia ( 6573 )

      I see them as targeting restaurants mainly and generally screwing those businesses over when they "advertise" for them.

      Groupon exists to advertise for itself. Its userbase is loyal to Groupon, not the businesses advertised. When that userbase is exhausted (and it will be) it will become junk.

      • by h4rr4r ( 612664 )

        Screwing them over? How?

        The restaurant uses them to sell X $25 off a $50 meal coupon basically. If the restaurant is dumb enough to not have this work out as a profit for them, they are going out of business no matter what groupon does. The groupon user base is not loyal to groupon, if they had a competitor these folks would use them just as much. Welcome to a functioning market. Buyers are rationally attempting to get the best deal they can, and sellers trying to guarantee minimum set of sales.

        • by garcia ( 6573 )

          Because the restaurant will run into several things:

          1. An overload of customers they cannot handle especially right before the coupon is set to expire from it's inflated value.

          2. Coupons are generally used to build customer bases. Because the customers are loyal to Groupon, they aren't interested in the restaurant itself, just the deal they got from Groupon. Thus the advertisement does nothing but give them even less money to make and little to no repeat business.

          • by emgeemg ( 182902 )

            1. An overload of customers they cannot handle especially right before the coupon is set to expire from it's inflated value.

            There isn't a business in this world that has ever (seriously) complained about having too many customers.

            2. Coupons are generally used to build customer bases. Because the customers are loyal to Groupon, they aren't interested in the restaurant itself, just the deal they got from Groupon. Thus the advertisement does nothing but give them even less money to make and little to no rep

            • There isn't a business in this world that has ever (seriously) complained about having too many customers.

              Yes, there is. You want *profitable* customers. If you lose money on each customer, what are you going to do? Make it up on volume? (Insert "That's the joke" here)

              • If the customer shows up once, and buys a $50 dinner for $25, of which the restaurant gets $15 and Groupon gets $10, and never comes back, maybe they lose. (Their direct costs are the cost of materials, plus the marginal costs of labor for the cooks and waiters, and maybe they don't make any extra to contribute to rent or fixed costs, but as long as they don't alienate customers with bad service from overworked staff, they're not actually losing marginal cost.)

                On the other hand, if half the customers who s

              • They lose money on that customer on that visit. The hope is that by getting them there, they can turn into a regular, full-price-paying customer for many more visits.
        • I'm not sure if you realize how coupons like that work for the seller. I would be shocked if anyone offering a 50% off special for an item is taking anything but a decent loss on that one sale. The idea for a business like a restaurant offering a one-time 50% off is to entice people who would not have otherwise dined their to do so at a trial price. Then, when some non-trivial percent of those first time buyers become regular customers who pay full price, you make back the money over time.

          When a local
          • by h4rr4r ( 612664 )

            These restaurants already require minimum purchase amounts and exclude things like alcohol. If they can't make money with that nothing will help them. The restaurant needs factor those sorts of things in and the conversion rate as well. Groupon will indeed then offer poorer deals, its apparent value is absurdly high anyway.

        • Groupon is a death knell for a restaurant. Bourdain mentioned it in Kitchen Confidential - the death spiral of a rest. begins with coupons and the like.

          Perhaps with a new restaurant to get the word out it works, but every Groupon rest. we've been to in the last year failed.

          I don't think that's Groupon's fault, however. I think a Groupon deal is a very good indicator if a restaurant is struggling.

    • Now matter how much the people on this mailing list spend, there is no way that it's worth $25 billion. It's just a spamish mailing list...

      I guess the tech bubble is back. Good news for programmers, bad news for dumb investors.

      • by haruchai ( 17472 )

        I don't think the bubble ever really went away; it just jumped to the next new, hot, sure thing. It'll only ever go away when people stop being stupid.

        • I don't think the bubble ever really went away; it just jumped to the next new, hot, sure thing. It'll only ever go away when people stop being stupid.

          So what you're saying is that it'll never go away?

          • by haruchai ( 17472 )

            After all the financial disasters dating back to the Savings & Loan crises, junk bonds, Black Tuesday, etc, let's say that I'm not hopeful unless STRONG oversight and regulation is put in place.

      • I'm just sad that I missed out on the Social Media bubble :-(

        I just want a decent bit of cash like the web boomers! At this rate if I have a rusty '91 Supra for a midlife-crisis-mobile, I'll be lucky...

        • I was actually working on a social media application similar to LinkedIn back when facebook wasn't even available in my college.

          I got alot more experience than money out of that bubble.. I got to see paychecks bounce and a company crash and burn, in a pretty spectacular fashion.

          It was sad to see, but most of the employees ended up landing on their feet.

      • by Surt ( 22457 )

        The bubble is back for sure. Programmer salaries jumped 20% this year, almost universally.

      • by hey! ( 33014 )

        Well, to be fair it's a bit more than a mailing list. It's a business that actually makes money, what's more it makes it in a straightforward way that doesn't require you to give much credence to any novel, non-negatable theories about the nature of "business value".

        That said, the simplicity of the business is also its drawback. They're basically brokering information between buyers and sellers then taking a cut. Anybody with a little money could reproduce that business model in a couple of months ... maybe

    • Groupon has a great business idea ...

      Really?

      To support a $25 BILLion valuation you need to make something like $2.5 BILLioin profit annually.

      If you can negotiate deep discounts on group purchases and have that much left over after the stuff is sold at deeply cut rates, it sends a message to the sellers AND other, existing, discount stores that they're WAY overpriced and can make more by going after fast nickles rather than slow dimes.

      (Of course it DOES, like discount stores, give the manufacturers a handy w

    • by Simon80 ( 874052 )
      Mod parent shill.
  • Welcome to 1999 (Score:3, Interesting)

    by Anonymous Coward on Friday March 18, 2011 @03:18PM (#35534702)
    I bet the stock is at 5 bucks in 3 years.
    • Re:Welcome to 1999 (Score:5, Insightful)

      by MetalliQaZ ( 539913 ) on Friday March 18, 2011 @03:25PM (#35534820)

      I wouldn't write Groupon off as a bubble stock. They actually make money, which means they can be legitimately valued. The hysteria in 1999 was in companies that had no proven revenue stream whatsoever.

      • Re:Welcome to 1999 (Score:5, Interesting)

        by Surt ( 22457 ) on Friday March 18, 2011 @04:20PM (#35535606) Homepage Journal

        The pricing is bubble, though. They're getting valued at 20X gross. That's a factor of 5 off normal.

      • Companies like Amazon, ARM Holdings, Microsoft and so on made money and could be legitimately valued. They are all very solid companies that are still around but none of them have got back to their 1999 valuations because those valuations were just way too high.

        As far as I'm aware, the only tech company that is worth more now than back then is Apple, which was on its knees at the time, and has since recovered.

  • How is this company even worth $12 billion? Seriously, even first post at half off coupons aren't worth that.

    • Because its the latest big buzz company to come around.
    • How is this company even worth $12 billion? Seriously, even first post at half off coupons aren't worth that.

      It's not worth the money. We'll just have to wait for a Groupon link to the 'IPO Deal' where we can get 10 shares for the price of 4 if we buy them the day after tomorrow.

  • by MarkvW ( 1037596 ) on Friday March 18, 2011 @03:23PM (#35534784)

    Wall St. can't keep itself from trying to blow up investment bubbles.
    There's a sucker born every minute (and then the taxpayers bail the investment banks out).

    • Strikes me that either money has devalued much more than we thought or the next new bubble has arrived. There are huge numbers of transaction discounters on line looking for the advertising campaigns that they can suck discounts from. This Groupon thing is a joke, where can I find someone taking a bet against their share price?, I will make a killing if I invest in them. The only thing that ought to make serious money is a product that does something better for less money - everything else is a short term c

  • by gad_zuki! ( 70830 ) on Friday March 18, 2011 @03:23PM (#35534788)

    I see a lot of useless coupons and services when I visit. Some "coupons" require me to buy in. Compared to deal sites like Woot or dealcatcher, I'm not seeing the allure. Typically, most of the "deals" are things like salons and jewerly/makeup which makes me think this is mostly a service for women.

    • Re: (Score:3, Informative)

      There are also a good number of restaurant coupons, at least in my area. I've used a couple and have been very pleased. If I like the place I'll be back, otherwise I'm not out the full boat for trying it.

    • Re: (Score:2, Insightful)

      by Anonymous Coward
      You really don't understand it then.

      All of the coupons require you to buy in. They aren't coupons at all but rather reduced price gift certificates (with short expiration dates).

      They probably make good money on non-redemptions too.

    • Now if it is on stuff that doesn't interest you, well then don't bother. Can't say I use it much myself. However the point is that if you see a deal you like, you buy in. You then get a large reduction in the cost, often 50%. That can be very worth it.

    • The best deals are on amazon and ebay:

      AMAZON:
      - Put the item in your shopping cart. Visit the site every few days, and you'll see it say, "This item's price has dropped". If it's a good deal, buy it.

      Example: I got SG1 Complete for only $110.... about half what it would normally cost. Orville Redenbacher popcorn for $15/case or ~40 cents per bag. Nature Valley Granola Bars for 16 cents each. Sony HD Radio for $75.

      EBAY, Amazon's Private Market
      - Most of the sellers advertise stuff as "new" when it's actual

      • by eln ( 21727 )

        - Put the item in your shopping cart. Visit the site every few days, and you'll see it say, "This item's price has dropped". If it's a good deal, buy it.

        True, but this technique is not without risk. Prices can rise as well as drop. For example, I put a printer into my shopping cart and decided to wait to buy it. Two weeks later, the price of the printer had increased by $250. Now, a month after that, it's dropped by $100, but is still $150 more than it was when I first put it in the cart.

  • by Anonymous Coward on Friday March 18, 2011 @03:33PM (#35534926)

    Groupon makes a lot of money. Groupon also has a massive amount of debt. They secured about a billion dollars in funding during a recent 'investment round'.

    We are talking about a billion dollars in funding to run a website that requires no novel technology, has no valuable intellectual property, and doesn't have much of a competitive advantage. There isn't anything stopping other companies and people from creating more Groupon clones (as is obviously evidenced by competitors like LivingSocial and Google's upcoming daily deals site).

    The VCs must be really desperate for a success story, considering all the 'most innovative companies' coming out of silicon valley have no business model. They want to make money off of one of the pseudo-profitable organizations while they can. Welcome to doctom bubble 2.0.

    • by Yvan256 ( 722131 )

      Wasn't Bubble 2.0 in 2005? I thought this one was supposed to be called Cloud Bubble!

      • by sznupi ( 719324 )
        Fog. Fog computing.

        (that said, Groupon seems to have quite a momentum; it might be able to direct lots of people where to buy maybe even "better" (as far as profiteers are concerned) than Adsense)
  • Off topic-ish (Score:4, Interesting)

    by Anrego ( 830717 ) * on Friday March 18, 2011 @03:33PM (#35534932)

    Am I the only one, or do all the groupon advertisements put anyone else off?

    I love the concept of groupon it’s really quite brilliant but for some reason all their ads and even their name totally puts me off. They feature food I like, but it doesn’t look appetising for some reason I can’t put my finger on. Also phrasing like “hot dang” appears to have a negative effect on me.

    This isn’t meant to be a troll or anything, I’m legitimately curious. I know I'm not the coupon type, but it seems weird that they put me off so completely.

    • their schtick is annoying but totally ignorable. i get their emails into a designated folder and daily just scan it (by eye) for businesses i would have gone to anyway (the business names are always in the subject line without any of their "clever" flavor text); if so, click and print. i make a groupon transaction maybe once every three months. i guess i'm not saving very much, but it is fun to get clothes or good food for half-off.

  • by cosm ( 1072588 ) <thecosm3@gma i l .com> on Friday March 18, 2011 @03:34PM (#35534948)
    This is what we value in this country. Companies that spam coupons for the masses to buy more shit they don't need. So Wall St. intends on pumping 25 billion into a company that doesn't actually even manufacturer anything. A company whose only value is that it offers discounts to other companies! So in ten years, is their going to be a gang-groupon.com, that groupon pays to send out links to its own coupon links? The service based slave wage economy of the future is going to be quite sad indeed.
    • by neoform ( 551705 )

      >So Wall St. intends on pumping 25 billion into a company that doesn't actually even manufacturer anything.

      I'm not in any way suggesting that Groupon is worth $25B, but Google doesn't manufacture anything and it's worth a lot of money.

    • by homer_s ( 799572 )
      From an article at the BBC:

      “The value of a dollar’s worth of cloth is exactly the same as a dollar’s worth of web design. One dollar.”

      Or in this case: “The value of a dollar’s worth of coupon marketing is exactly the same as a dollar’s worth of widget manufacturing. One dollar.”
    • While manufactured goods and services are all nice and everything, you'd think that a site full of geeks would have a little more appreciation for the value of information. For instance: without a coupon for Groupon, I'd never have even known to stop by the cute little tea shop in downtown San Jose.

      I'm not saying it's $25 billion valuable, or that it's an unmitigated boon to society, but have a little respect for the real positive effects you can get from advertising (like reduced costs of search) before y

  • I wish I could mod tags. That "bubble" needs a +5 Insightful.
  • I bet we could get a good deal! Anyone want to go in on a groupon to buy groupon stock?
  • by wizeman ( 170426 ) on Friday March 18, 2011 @03:42PM (#35535070)

    ... according to one inflation calculator [146.142.4.24], the $24.6 billion of Google's IPO in 2004 is worth $28.82 billion in 2011 dollars.

  • Receive $25 billion worth of Groupon.com valuation for $5 billion.* (* groupon must be redeemed on or before March 10, 2000)
  • Ever read the fine print on coupons? It says "Cash value 1/20 of a cent" So... Anyone care to do the math on how many Groupons need to be cashed in before the company is actually worth 25 Billion Dollars?

    I think that's 2 Trillion Groupons. Which means that every person on earth would have to cash in 333 Groupons each.

  • can't wait till people realize this is just opt in spam and go ahead an start opting out of it.

    I tried it for a bit, it was the most annoying thing imaginable.

  • Inflation has been going crazy. Google IPO'd before the market crashed and the government printed hundreds of billions of dollars. How much is Groupon's IPO worth in Google IPO era dollars?

    This article reminds me of the dumb metric that comes out every holiday seasons. "Shoppers spent more this season than they did last season." No shit Sherlock?! Everything was more expensive this season than last season. They might as well say, "Shoppers spent more money on gas getting to the mall this holiday season

  • Welcome back Tech Bubble. How ya been?

  • by nlawalker ( 804108 ) on Friday March 18, 2011 @04:35PM (#35535796)

    Why does Groupon retain the "tipping point" for all their deals? My understanding is that Groupon is the second or third iteration in a series that was based on this idea, and I suppose it was interesting when they were still a startup, no one had heard of them and businesses wanted a little insurance on their investment. But now that they're big, I don't see how it's still relevant. Since they started getting big press, has there been a single Groupon in any market that has failed to hit the tipping point?

    Today's deal in Seattle tipped at 100 before 7AM and there are currently over 3000 purchases, with about 50 taking place just within the span of me writing this post. If anything, it seems like the right move now would be to emphasize purchasing before selling out, a la woot.

    Part of Groupon's value is that they help businesses plan deals and write excellent and differentiating copy to sell them, and they do a good job of it, so I don't see why they still have the tipping point mechanic. Does anyone even look at it when they evaluate a deal?

  • It seems all the local offers I get are places that are advertising a % off of a price that is a % higher than their normal price...the 30% or so savings tends to vary from 5-10% to sometimes actually paying more. I'm hoping it just my area where this happens but if thats the norm I really dont see why in the world it has gotten so popular, either people are really gullible or the investors age.

  • I have several friends in the service industry and I just want to share something with the /. crowd that probably takes advantage of groupon offers more than the average Joe.

    When you present a groupon, the person serving you automatically thinks a few things about you:

    1. You are cheap, and therefore will not tip as much.
    2. You are going to receive a service or food at a discounted rate than normal, and therefore will not tip as much.
    3. You are more likely to be active on yelp, and therefore will n
  • I'm a European ignorant of Groupon. Looking at the site, it seems to be a site that catalogs or shows discount coupons for stores and items. Is that what it is? I understand it can make money, but how could it become so successful?
    • by danlip ( 737336 )

      I'm an American and I am wondering the same thing. Before their distasteful Super Bowl ad I had never even heard of them. And that ad certainly didn't make me want to start using their service. I can't imagine how they could be valued anywhere near what Google is worth.

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