# Groupon IPO



## sags (May 15, 2010)

After spurning a 6 Billion dollar offer from Google, Groupon is looking to go public with a 15 Billion dollar IPO.

Seems to me, that because they depend entirely on Google to put their advertising on webpages, they may have bit the hand that feeds them.

There is absolutely nothing to prevent Google from replicating the same business and plastering it on every web page that uses Googe advertising for revenue.

Or a couple of University IT grads could start a similar company.

Personally, I found that the Groupon ads earned a little more income for awhile, but tailed right off. They were continuing to offer discounts on such things as Pilates lessons or gym memberships. and I think they covered that ground already. The odd time there was a 2 for 1 food deal or something, but not much else of interest to most people.

Is Groupon the next Google, or just another dot com bust in the waiting?

Before investing, people should read this in depth series of articles. It would seem that Groupon is a nightmare for retailers, and discounting in general spells doom for business owners...........

http://www.retaildoc.com/blog/groupon-worst-marketing-business/


----------



## Argonaut (Dec 7, 2010)

It's a bust, I think the stock price will be hard pressed to reach the level of the IPO ever again. Even the name is lame. Ugh, Groupon.

Take my prediction with a grain of salt though, because I made a vow not to invest in the NASDAQ seeing that I don't understand tech. How are companies like Salesforce,com getting away with 200+ P/E ratios? What do they even do? How the heck does cloud computing even make money? 

But I digress. It's nothing but gambling, especially with stocks that don't pay a dividend.. you need to get out at the right time or else you'll lose your shirt. And stocks with solid balance sheets that do pay a dividend like Microsoft and Intel are unloved by the hype-based street.


----------



## sags (May 15, 2010)

I would have to agree with you, but more from a retailers point of view. After reading the series of articles that I posted (later), how many businesses can lose 75% of the retail price and survive? They are paying customers to walk out the door with their merchandise, and Groupon gets all the kudos from customers.

The GAP lost 8 Million on their Groupon 50% off deal? I didn't realize that companies were so stupid. If I had walked into the GAP corporate headquarters and offered to give away 8 Million worth of their merchandise as a promotion, they would have thrown me out the window.

Groupon is on track to make 400 Million dollars, but it has come out of the hide of retailers. Sooner or later, they will wake up and smell the roses.

When that happens, Groupon will be worth zip....................

The only way for it to be successful is to mine such places as gyms, where they have fixed costs and can squeeze a few more through the door.

For anything retail, with a product, it is bad for business.

They were nuts not to grab the 6 Billion from Google, which begs the question of what was Google thinking......?


----------



## plen (Nov 18, 2010)

My anecdotal evidence indicates the very same people who use Groupon are the type of consumers who have little loyalty which is the main reason for these losses, is it not?

Google, however, are not complete idiots and saw $6B worth of something in it. I'd lean a lot further towards bust if it were not for this. It is likely I'm oversimplifying things though and there's more to what Groupon provides than I know.


----------



## sags (May 15, 2010)

I think you are right. 

Coupon clippers and deal seekers, are notoriously disloyal customers.

From Google's standpoint, I just don't get it, except that they virtually control almost all advertising on the internet and saw Groupon as taking away money from other Google ad purchasers, and of course Google themselves.

I think that had they bought it............they would have buried it and tried to turn all those Groupon merchants into Google Adsense users.


----------



## Argonaut (Dec 7, 2010)

Keep in mind that the street hammered Google for making the offer, seeing it as overvalued. Why would the street get behind the IPO at more than twice the former offering?

And stocks don't always go down on takeover offers. For example, Caterpillar/Bucyrus, TD/Chrysler Financial. The difference being those offers made sense.


----------



## RealizedReturns (Oct 16, 2010)

Oh, a couple of IT grads can start a competitor sure.. and they have. over and over and over. These deal sites are all over. Groupon continues to be the far-and-away leader.

The idea of "group buying" is sort of twisted here as others have pointed out. I actually think it still has a lot of life left in it, but the novelty and the reach will eventually wear thin and they'll need to adapt to changing customer (and retailer) demands to keep the revenues flowing in the long run.


----------



## sags (May 15, 2010)

Groupon's slogan to retailers could well be:

You will lost money on every sale, but make up for it on volume.


----------



## Bupp (Nov 13, 2009)

Groupon's main competitor is the yellow pages.

I think it is more likely that yellow pages (who already have a strong relationship with small businesses re: advertising) comes out with a product which displaces groupon rather than google displacing them. An example would be how yellow media has "deal of the day" on their redflagdeals.com website.

I'd much rather own yellow media then groupon.

That being said groupon is throwing off cash flow like nobodies business.


----------



## RealizedReturns (Oct 16, 2010)

Bupp said:


> Groupon's main competitor is the yellow pages.


Yup. And don't forget the juggernaut eBay who has already launched the same service via "Kijiji Daily Deals" as well.

LivingSocial is right on their heals in popularity too from what I recall having read.


----------



## andrewf (Mar 1, 2010)

I think the business model is valid. That said, there's nothing really proprietary and barriers to entry are low. Dozens of similar sites have sprung up. Google makes money hand over fist because it has stellar proprietary technology that adds value for customers (bother searchers and advertisers) and barriers to entry are very high. Therefore, no. It's not the next google. It has first mover advantage, and that advantage will wane. Sounds like a good stock to short over the longer term.


----------



## tendim (Nov 18, 2010)

RealizedReturns said:


> Yup. And don't forget the juggernaut eBay who has already launched the same service via "Kijiji Daily Deals" as well.
> 
> LivingSocial is right on their heals in popularity too from what I recall having read.


I use three of the group-coupon services: GroupOn, Kijiji Deals, and WagJag. Kijiji Deals, while owned by eBay, is nowhere close to GroupOn or WagJag in terms of quality of offers.

It's interesting to see this companies come about because the idea of a "group buy" is nothing new. I first found out about them on car forums when I was an avid car enthusiast, and there are several "group buy" sites out there as well which offer similar services. I'd be willing to bet that that's where GroupOn got the idea to begin with.


----------



## fatcat (Nov 11, 2009)

let me add my 2 cents here:

frist, the reason google offered so much was because groupon does a lot more than just advertise on the net, they have an on the ground sales force which is what sets them apart and is why google was interested in them in the first place ... if google could just wave a wand an put this in place, they wouldn't have offered 6 bills in the first place, no other coupon site has a sales force on the ground of that magnitude

second, as a former retailer i know how valuable it is to get people to "cross the threshold", merely to walk in the door is a huge step for many businesses, just to get customers to stop in and see what you have and get to know your business has huge long tem benefits, if you can't get people to cross the threshold you are screwed, so even if 75% don't come back, you retain 25% and the other 75% know at least know who you are and what you do

there are plenty of other search engines but google still ranks #1 and that has a lot to do with being first out the gate with the best product


----------



## canehdianman (Apr 7, 2009)

I signed up for Groupon and Dealfind several months ago.

At first I found it interesting and bought a few coupons.

Now I just find them useless, the majority of the deals are for yoga, pilates and laser hair removal.

I'm going to unsubscribe.


----------



## Larry6417 (Jan 27, 2010)

This article nicely sums up the bear case for Groupon http://www.cjr.org/the_audit/the_groupon_bubble.php

Basically, follow up studies have shown that only 13% of customers are willing to pay full price for the service/ product afterwards. The people who use Groupon are (gasp, ) bargain hunters.


----------



## sags (May 15, 2010)

Thanks for the link........informative article.

This quote pretty much says it all for me...............

*Let’s do a smell test: If Groupon is valued at $20 billion will be worth more than companies like Allstate, Xerox, Best Buy, CBS, Qwest, Marriott, Adobe, Raytheon, Alcoa, and Vornado. Does that make any sense?*

Gosh, I think I would rather own Alcoa.........and sell to the Chinese.......


----------



## sags (May 15, 2010)

And here comes Google.........right on cue.

Also interesting to note that Amazons participation in an online coupon deal sold 1.3 million coupons, at a loss of 10 bucks a coupon.....or 13 million dollars.

It must be raining money in retail land these days........

Good luck to all those online coupon companies, when they suddenly find themselves pushed off web pages to make room for the Google deals. Maybe that is why Groupon has an "affiliate" plan.

http://business.financialpost.com/2011/01/21/google-readies-groupon-rival/


----------



## Argonaut (Dec 7, 2010)

Groupon should have listened to the Steve Miller Band.

"Take the Money and Run"


----------



## Lephturn (Aug 31, 2009)

sags said:


> And here comes Google.........right on cue.
> 
> Also interesting to note that Amazons participation in an online coupon deal sold 1.3 million coupons, at a loss of 10 bucks a coupon.....or 13 million dollars.
> 
> ...


I think you guys are missing a couple of points about Groupon.

1. It's the local part that's hard. Selling into local markets is tough, and Groupon's done it. Getting local distribution in a service like this is not easy or fast - and Google could do it but the price the offered for Groupon tells you what they think it would cost them to do it themselves. This business is not easily or cheaply replicated.

2. How many Groupons get sold is not the issue - they don't lose money every time a 50% off groupon is sold - they lose the money when they are purchased and USED. The question is - how many times are the deals purchased and then never used? I'm willing to bet that's a substantial % of the time and it significantly subsidizes the overall cost of the deals.

Not that I will jump up to purchase a Groupon IPO - that's nuts.  Then again that's what everybody said when Google launched it's IPO as well.


----------



## GeniusBoy27 (Jun 11, 2010)

Groupon's IPO valuation is crazy because the barrier to entry is low, and to reproduce the local market forces against similar products will be difficult.

Google on the other hand, had something so easy to use that it dominated the market. Groupon doesn't have that same capacity. That's why it made sense to buy Google's IPO. And most people didn't think Google's IPO was nuts. That's why google share price went up after its IPO.


----------



## moneymusing (Apr 3, 2009)

Groupon looks like a bust to me from an investment stand point. I'm sure there will still be a groupon for years to come but it would be an awfully painful ride for shareholders.

That being said, Google has a "Google Offers" http://mashable.com/2011/01/20/google-offers/ that they will be rolling out but really I can't making a dent in Groupon's market share of bargain hunters. Google doesn't have a great history with retail based products (Froogle, Checkout, now Offers). They keep them going but in reality not many use them.

If you like deals stick with getting the groupons not the shares. My $0.02


----------



## Jungle (Feb 17, 2010)

Groupon getting shorted hard over the last couple days.


----------



## Causalien (Apr 4, 2009)

Yeah, I should've shorted Groupon instead of SalesForce.


----------



## Argonaut (Dec 7, 2010)

Groupon is finished. The options were telling us something, I should have jumped on board.


----------



## andrewf (Mar 1, 2010)

Any news on GRPN? Or did the bulls just capitulate?


----------



## Causalien (Apr 4, 2009)

It was never the bulls. It was the underwriters that held it up.

Right now it just falls back to the original IPO price. $12 should be fair valuation. $0 it should be because of the numerous problems it has.

** edited out some statements about what they are doing. I don't want to be held accountable in the future.


----------



## Lephturn (Aug 31, 2009)

It should be called "GrouPonzi".

When the options listed on it, the premium on the puts was insanity. I couldn't bring myself to pay the price.

Also - Causalien you are right on - once the underwriters made their money, look out below.


----------



## marina628 (Dec 14, 2010)

I sold last Friday at the near high price ,bought in 3 lots after I paid my fees I made $102.34 .I can't believe on Friday I was feeling bad for selling wondering if Monday it would go up LOL .


----------



## Causalien (Apr 4, 2009)

LOL is all I feel about this Marina. 

Your first IPO and you made the perfect play. Making money too.


----------



## marina628 (Dec 14, 2010)

I am definitely playing a big poker game tonight lol .But i realize i got LUCKY so next time I will not make any moves without running it by you guys lol.


----------



## fatcat (Nov 11, 2009)

and those guys turned down 6 billion from google .. wow

don't forget that the reason google offered them 6 bills was their sales force

any schmo can start a e-discount-coupon company and there are now hundreds of them

groupon is the only one of them that has an actual on the ground fully articulated sales force in all it's territories, that sets it apart from the rest and is why google was so interested

but i agree, i tired it and after awhile it gets to be a pest, you get sick of all these offers
they need to refine their product and make it more useful


----------



## sags (May 15, 2010)

Besides the accounting irregularities, lack of cash, and merchant dissatisfaction, I think the biggest problem for Groupon is that they rely on online advertising from Google..........who could be their biggest competitor.

Google doesn't care. They get paid one way or the other.

Either Groupon pays whatever Google dictates for ad ranking, or Google places their own ads.

It is hard to lose when you own the whole monopoly board.


----------



## daddybigbucks (Jan 30, 2011)

does everyone still figure this is a dog?
low of $2.4 and now up to $10.
i am planning a trip to chicago and starting looking thru it and seems like a pretty good deal for merchants during slow times.
looks like they still don't have positive cash flow but alot of people are buying in.


----------

