How on God's green earth is Groupon supposedly worth 750MM, which is their preliminary valuation. (CS,MS,GS as lead underwriters)
Now I can sort of see how Linkedin/Facebook is worth a lot because of their "information database" value, but I personally do not like the Groupon business model. I also think the services they offer are retarded. Does anyone here actually like using Groupon? If so, please elaborate on the value it provides you.
unrelated:
Pandora also updated their filing today for an approx 120MM IPO.
Groupon is being valued at far more than 750MM, more like $20 billion.
http://blogs.wsj.com/deals/2011/06/02/groupon-ipo-its-here/
i actually like LivingSocial's model a little bit better - they give you discounts based on how many referrals you pull in. From a larger picture this seems to be the next generation of Yellow pages imo ..
There are cashing in while the getting is good. They probably salivated over the LinkedIn IPO. If I was them I'd be doing the same, they lost $750 MM and they are IPO'ing to a group that is dying to buy them up!
They are raising $750M not a valuation of $750M. The pricing of the IPO will not be determined for a while.
Read more: http://dealbook.nytimes.com/2011/06/02/groupon-files-to-go-public/
[quote=Torres]They are raising $750M not a valuation of $750M. The pricing of the IPO will not be determined for a while.
Read more: http://dealbook.nytimes.com/2011/06/02/groupon-files-to-go-public/[/quo…]
thx
If my memory serves me, someone (Google I believe) offered them $6B not too long ago.
I'd assume they saw the LinkedIn craze they decided to pounce. I haven't looked at any of the details yet, but I wonder if they're selling only ~10% for $750M.
this is interesting, it makes me wonder where is Google and cs/ms/gs coming up with these valuations. Makes me think of the part in Barbarians at the Gate where Peter tells Ross that they will make their valuations so high no one will even think of outbidding them, even though there really was no reasonable basis for it, it was still the same company.
Also, I think I might try to use a Groupon and Living Social sometime in the next couple of weeks, see if it is worth all the hoopla. Ill let you guys know my experience.
I would be interested in anybody that is a serious growth equity (either public or private) investor who can tell me what they believe the 2-3yr forward PEG (or equivalent multiple of EBITDA growth) could be on these guys and whether she/he believes they are buying that growth @ an attractive level vs. comps
Needless to say the competitive landscape is getting tough. Recent newsflow out of FB, GOOG and others regarding direct marketing of goods/services offers is a formidable challenge here
So you're saying it's not that unusual for such a high profile growth equity opportunity to only be bringing in $70mm, but valued at $20bn? Sorry, don't know much, just trying to clarify.
i remember my first IPO...
+1
Groupon's business model is far superior to LivingSocial.
Groupon recently launched GrouponLive. They spent the last year installing properitary software at tons of different individual companies, now these companies can go in and type in live deals whenever they want. For instance, NY Bagel is having a slow day, so the owner authorizes the manager to type in $8 of food for only $3 today from 1-4PM. Suddenly, Groupon has revenue coming in from the 10's to 100's of deals in every city across the globe. Even better, once you've installed the software at the company there is no longer any reason for that company to use the competition.
This isn't a viable long term strategy for Groupon's business customers. It's the same reason Apple refuses to put things on sale and Wal Mart has such a hard time raising prices and constantly has to hammer their suppliers for cheaper pricing. How many mom and pop shops have the pricing power of Apple or the purchasing power of Wal Mart?
Groupons current model is a ponzi scheme built on mom and pop shops. What happens when a few years down the line there are simply not enough shops to run the scheme? Unless they branch out into other lines of business I do not see how this is sustainable.
You are comparing apples to oranges comparing Groupon to Apple and Wal-mart, a better comparison would be comparing Groupon to Priceline. If you are a Mom and Pop shop and you have too much inventory, you have this viable alternative to unload it. It is not something you are going to do every week or even every quarter, but it can be nice to do it once a year, and think of the thousands of business in every city across the globe that can utilize this. The competitive advantage here is if they install all this software first they can dominate the market for some time, just as Microsoft did with Windows, by having it installed on virtually every PC.
How can you possibly call Groupon a ponzi scheme? I have to question whether you know the meaning of those words. Groupon allows small business to reach a mass market that they otherwise would have a tough time reaching. So instead of the small business spending $10,000 on marketing they use Groupon and get cash up front for doing so. The business may end up losing money on the Groupon but consider this. If they can retain even low single digits of repeat customers then it may have been well worth it. Also, have you seen studies on the amount of gift cards that go unused, it is something astonishing, I want to say over 20%. I have not seen any material out yet on the amount of purchased Groupons that go unused but I think it is safe to assume at least a small percentage, which is also straight money in their pocket.
It's so great reading benjamin graham stuff and watching these things happen.
Groupon could definitely be a winner in the future, but for me the downside risk is so great I'd stay as far away as possible.
I disagree. Value investing has nothing to do with what growth stage the company is. You can practice value investing in a fast growing tech start-up or a mature industrial company. Whether a company is growing quickly or slowly, it has an intrinsic value, and value investing is simply buying companies for significantly less than their intrinsic value. Groupon is a terrible candidate at it's current valuation.
When value investors do invest in growth companies and "pay for growth" (paying 15x-20x+ multiples), they look for companies that create value through growth. A example would be a company with strong barriers to entry in an industry that, through its current growth, is able to achieve better and better economies of scale, thus earning higher ROIC, and simultaneously growing market share and making it harder for new competitors to enter the industry the bigger and faster it grows. Intel in the 80s-90s is a great example of a growth stock that could be purchased below its intrinsic value, even at higher multiples, because it exhibited these traits.
To clarify my stance- When looking at this name I think the discussion merits growth equity concepts like what people think the company's growth in subscriber base could be in 1 2 3 yrs, whether pricing compresses, whether they can continue to effect the same rev share thru their merchants, whether their marketing spend can come down and still support growth, what the competitive landscape is and what GOOG & FB penetrating ''offers'' markets means, whether their fixed costs need to step up in conjunction with that growth and how margins shake out in the future-- and how all that funnels to forward PEG and Rev multiples that are attractive in the context of comparable companies with similar business models, what a catalyst could be, whether it's just growth or consolidation in the space, their M&A strategy, new initiatives, and more. I'm not pretending to know all the right questions but I sure as hell know it's kind of half-assed to say this is a bad story because "Seth Klarman and Ben Graham told me to always look for companies trading @ 4x EBITDA with 30%+ margins and great FCF!" like really dude cmon
dont worry when it is finally priced, its stock will be another failure like likedin is soon destined to be....
Problem with applying a value framework to companies like Groupon or other speculative companies is that many investors will throw cost of capital out the window. If they can't produce earnings, but are cash flow positive, the management can always point to their strong cash flow and say that one day that cash flow will translate to earnings. Revenues are still growing strongly, so investors eat it up. This happens year after year because each year you are one step closer to that holy land of earnings. This is where valuation theory unhinges from practice, because clearly the stock is now just a piece of paper, but it is actually kind of rational for new suckers to buy in since they are that much closer to real cash flows. Perfect example right now is CRM.
CRM probably will see expanded net margins once they cut back on their insane sales compensation, but that's going to be far in the future after years of wasted compounding. But if investors don't care, then this is kind of company is the perfect "greater fool" trade.
I think Groupon is shaping up for something similar because their costs are highly correlated to selling costs. I certainly don't think their primary revenues will end up coming from self-serve couponing. Facebook/Google can replicate that in a heartbeat and their platforms mesh better with that style. Exclusivity is key for Groupon getting the best deals and driving insane traffic. If you take that away, what's left?
I made an angel investment recently in a company that seems to me to have a far superior platform to groupon and living social... if it gets to be 5% the size of groupon, I'll retire : )
One thing I found ridiculous is that they're using a metric called "Adjusted CSOI" to track their business. This excludes, among other things, online marketing expense. WHAT? Isn't that what groupon is at it's core?
Oh, and the valuation is up to $30BB
http://dealbook.nytimes.com/2011/06/02/groupon-files-to-go-public/
Groupon in NYC is big. Means big discounts, I personaly like it.
Groupon is a fucking website and sends deals via email - I am stuggling to grasp the proprietary nature / technology of this company. Sure, it has gotten major traction but its inability to turn a profit is quite interesting. Tech bubble anyone?
I have seen 5+ startup ideas that are far superior to Groupon.
International Pymp - my fund just did a Pre-Seed round in a Groupon - like Co., but much more promising model.. time will tell
[quote= my fund just did a Pre-Seed round in a Groupon - like Co., but much more promising model.. time will tell[/quote]
Really? A much more promising model than a company that has grown at 2,000%+ and has a revenue run rate of well over $2B?
And you're calling a tech bubble while investing in another "Groupon-like company" where there are already dozens of big players in the business. Good luck...
Really? A much more promising model than a company that has grown at 2,000%+ and has a revenue run rate of well over $2B?
And you're calling a tech bubble while investing in another "Groupon-like company" where there are already dozens of big players in the business. Good luck...[/quote]
People give Groupon too much credit for growing revenues by 2000%. Any asshole who sells goods / services at 50%+ off market value can create sales volume. If GM started offering 50% car deals, I'm sure their revenues will go through the roof. Doesn't mean it's a great business model.
Scalability and long-term sustainability of Groupon is still going to be an issue. Not only do they have cash burn to worry about, they are eventually going to have to worry about merchant burn (going through all of the relevant small businesses / restaurants in a market).
I was quite shocked at how high their operating expenses are, originally thought they would be much leaner...
The real question is, who the fuck uses this shit? Honestly, they send out useless cupons everyday that cost you more then they save you.
The other businesses with better business models should still struggle to compete with Groupon unless they're vastly better, which I don't see how they can be. The network effect resulting from being the first mover IS the value being offered. The other feature being offered is the small amount of deals. As soon as the number of deals explodes, Groupon's value-add significantly fades. The other guys offer many less eyeballs to businesses, so unless they are asking for a much smaller cut, why would a small business go with them.
the network effect here is not that strong.
google and facebook offer many MORE eyeballs.
competitors asking for a smaller cut is precisely what will happen. that's what happens to profits that aren't protected by barriers to entry.
double post
Facebook and Google will own that market in 3-5 years.
This is turning out to be an awesome summer. One massively overvalued internet company after another.
Bubblicious. The only good thing to come out of this wave of terrible Renren-like absurdity would be if Facebook were to miss the window of valuation ridiculousness. Down with the social networks.
Honestly, Groupon has absolutely no barriers to entry or differentiating factors apart from its userbase in a saturated market.
Classic opinion just released:
http://www.reuters.com/article/2011/06/08/us-groupon-valuation-idUSTRE7…
Looks like they're struggling to get the deal subscribed and they're bringing on 6 more underwriters:
http://www.bloomberg.com/news/2011-06-10/groupon-said-to-offer-role-to-…
What are the chances they pull the IPO altogether, and back up and punt?
Is GroupOn's business model scalable? Nope! (Originally Posted: 05/09/2011)
There's been a lot of talk about GroupOn lately. As someone who's seen quite a bit of internet before, I just don't think it's scalable.
This is pretty relevant because the history of internet discount sites is as long as a bad coma. Typically they have been filled with trash ads and fake discounts and presented all of these in a shotgun way. The only thing GroupOn has done differently is: 1) the 'one deal a day' meme, 2) having a nice and user friendly front end.
Any new starter that does both of these things and happen to get a bit of publicity would be where GroupOn is today.
Now, is it scalable? My offhand theory is no.
Firstly, let's presume that GroupOn must continue to offer high quality deals (desirable buys at deep discounts) to succeed. This on the basis that a) diversification is very difficult (even given a shitload of visitors - they have no supply chain and could never be a Google or an Amazon), b) if the quality of deals falter you will rapidly have competitors take their place.
Secondly, let's say there is a limited pool of companies with a pyramid-shaped distribution according to size. The decision to offer a deep-discount deal is one that stems from unique circumstances and willingness to sacrifice some surplus time or earnings for potential new customers. Let's call it 'risk effort'. By definition it HAS to be unique or otherwise it would be "just your everyday discount".
Let's say the current situation is that this circumstance appears randomly across the companies in the company pool, and GroupOn takes advantage of that.
As the number of GroupOn users grow, you exclude the lower tiers of the company pyramid, because the capacity of any single company to put down 'risk effort' to serve X new customers is at some point limited. The news report about the photographer who has now committed to work 1 year for free is a case in point.
As you creep up the pyramid of company size (and capacity), not only is the number of companies becoming smaller, but the probability of any given company being willing to put down 'risk effort' to give a substantial discount decreases. They prefer to market their unique deals directly, they don't want to give GroupOn the 50% cut, and they finely tune their prices far more detailed than the "give away X items at nil price to get new customers" concept. How many deals from companies of any meaningful size have been on there?
There's only so far you can stretch hairdressing and poorly accessible restaurants.
Views?
this is laughable, especially the title
Guess you dont read any tech news whatsoever...
Nothing in the news about GroupOn that indicates otherwise. What have you read? Can you refer to any deals they have presented from nationwide chain stores?
The news are rather full of competitor sites being launched now that there is capital behind them after a long period of drought, and GroupOn should have the worse deals due to its size.
Groupon already has operations/offices in dozens of countries, so I am not sure what you are talking about
So do lots of tech companies that dont make a profit. Whats your point?
GroupOn's business model doesn't account for larger companies that can afford to advertise sales on their own. The entire benefit of GroupOn to its advertisers is GroupOns followers. No one needs GroupOn if they can afford an add in the sunday paper. This is where GroupOn is currently running into problems. There are only so many small companies that offer goods or services that make sense to use GroupOn. I see it being almost exclusively service based deals that need to fill time slots in their week or month. The problem that comes from this is over demand. If you advertise for a 30 min massage for half off you have up to 16 time slots per day given a 9-5 operating hours. What happens if 30 people buy this deal from GroupOn? Are the last 14 screwed out of their purchase?
Basicly GroupOn has a lot of hurdles to overcome yet to make the service something that is more than just a fad.
Missing the big picture: First, whether a business is scalable and whether its core offering is scalable are two separate issues. You can effect scale through organic and inorganic expansion into adjacencies your addressable market has demand for. I think there's various prospects for other highly relevant product offerings that will scale the Groupon enterprise even if its core offering is constrained.
Second, many of these 'platform' companies are effectively becoming exchanges ala Amazon, EBAY, et al and should realize significantly more scale as these discounts become more tradable in a liquid secondary market. Now I surely am not envisioning market makers quoting active discount deals but something like the ability to purchase a block of coupons worth 1/2x and reoffer them for 3/4x near expiration date through more efficient marketing is likely to attract intermediaries/distributors to capture value gaps.
Third, on the backend the MASSIVE collection of consumer trend data is highly monetizable. The potential to create a recurring revenue stream where you provide retailers/food & bev /advertisers the ability to dig into petabytes of anonymous data and identify high growth trends to target is there. Categorize this as a cloud computing/outsourcing play where said corp customers don't hold the infrastructure and are outsourcing a portion of their market research/analytics to you "as a service."
That's what I would do anyways ;)
Is the data really highly monetizable? It seems to me that what's generated by GroupOn with its current business model would typically be far less useful than what's generated by Amazon, eBay or Google.
Yes, do you disagree? Highly monetizable because (1) there is a deep bid for these analytics (2) it can highlight high growth segments (3) it is local, so very effective in targeted region-specific marketing strategies of large corps I think it will be useful in its own way. Anyways those are three visible ways to scale the biz to refute your post. Shake and bake.
The problem arises in how long can this dats continue to be collected. The main business idea still has to be viable for these scaling ideas to work.
To be perfectly honest I don't think you refute much.
You provide no evidence for why there would be a "deep bid" for these analytics, or a definition of what "these" analytics implies (as opposed to 'other' analytics which don't have value?). Your entire rationale is based on somehow a large amount of data being extremely valuable, with no consideration as to the limitations of that data, who would use it, or what alternative sources are available for similar data. Magical thinking.
To repeat myself, the data produced by Amazon, Google and eBay would seem to be far more valuable for almost all purposes. Large corps outsourcing their demand and pricing analytics? Groupon specialises in certain types of one-off offers with discounts below what would make the offer profitable, hence your data will be noisy. On Amazon you can tune prices by percents and see the demand response over time. On eBay you can see the price levels at which 'new' items sold by someone with solid ratings gets snapped up immediately vs being posted for weeks. For most kinds of analysis that occurs to me Groupon would be next to useless in comparison.
Or maybe someone would actually find it useful. But to somehow bless Groupon because they produce some kind of customer data - any kind of data - is bizarre. Every firm that does business electronically generates customer data but few have grown to greatness with that as a big part of it.
And 'scaling the business'? All businesses are scalable to infinity and beyond. Few actually succeed at it even though probably most want to do it. The step beyond is to ask what the nature of that scaling would look like. Simply saying "THIS COMPANY CAN SCALE ITSELF BABY!!" as some kind of blessing of good fortune seems daft.
double post
this is kind of a non-comment, but the company name is "Groupon", not "GroupOn"
A better question is: what barriers exist to prevent competitors from stealing that first mover advantage (yay buzzwords!).
Answer: none.
IMO, these wild valuations being applied to Groupon are ludicrous. It's trivial for a competitor to set up shop (note: livingsocial, dealon, etc. ). Add to that, retailers are beginning to realize that they often don't get enough repeat business to make the insanely low prices worthwhile, so I see Groupon's advantage eroding on both ends (increased competition, and decreased interest from some retailers).
What's retailers' alternative? Build their own? Why don't corporations float their own equity markets? These guys are an exchange. Centralization of liquidity and outsourcing of infrastructure to maintain that liquidity is not something retailers will mess with...The validity of the biz model's opportunity to scale is really a bet on the continued electronification of forward SME product consumption. Sure there will be competitors but the decreased interest from retailers is unlikely if liquidity remains... (demand driving supply).
I've got one of those too.
I like the rationale behind this but intrinsically, coupon values would fall as they approach expiration... I'm sure in-the-money options were just the first thing you thought of though hahaha
Revenues for this year topped 3 Billion according to CNN. Given profit margins of 25%, these valuations are far less ridiculous than the Facebook valuations. Plus they're diversifying their offering by branching into location based mobile marketing. It should be interesting, to say the least.
Their success today isn't being questioned. But when you start talking about valuation, it's really only useful in the context of trending and future expectations. Revenue topped 3 billion this year..... based on all the data we have available, do we think that will be 6 billion in a few years? Or 1 billion?
Back to my initial point - all they have going for them is being first to the dance. With margins at 25%, and no barriers to entry, tons of other players will jump in (have already) and steal market share simply by undercutting price. All you need is a few million in seed money (less probably), which any VC firm will throw at a team of developers, and you've got a Groupon clone. Hire an army of 18 year old "interns" for no pay, sign up a bunch of retailers, and voila.
Margins of 25% imply that retailers are overpaying to use Groupon - which works for a product or service that isn't easily replicated in the short term. That's not the case here - imitators are popping up like mushrooms. That process plays out for a few years, and suddenly Groupon isn't quite so awesome as it is today.
People are lax w the term profit margin. Let's get specific -are you talking gross profit, ebitda margin, net margin--what? To the other poster --- as you scale this, i think many costs are fixed, so growth is accretive to profitability (margin expansion).
How in god's name could you think Groupon's business model isn't scaleable? Its so simple, and it is already national.
scalable means margins, bro. you scale revenue over a fixed/somewhat fixed cost base. groupon is "global," but they have to hire a shit ton of sales force to grow the business and they don't make any money because of it. they have yet to demonstrate that their business is scalable.
Groupon Whiffs on Earnings (Originally Posted: 02/09/2012)
Told ya.
Looks like Groupon shareholders are in for a rough ride today. Yesterday after the close (natch) the company released its first quarterly earnings report as a public company, and boy was it a stinker. I use the term "earnings" report loosely, because there weren't any.
That's right. Even after raising $700 million at their IPO in November, the company is still losing money. Predictably, the stock got punished in after hours trading last night and it looks like that will continue today. For the full year 2011, Groupon lost $351 million on revenues of $1.6 billion. Investors are understandably wary of accounting shenanigans after the company had to restate revenues before going public. For those who don't know, the company was essentially "double booking" revenues from the sale of their online coupons. So there isn't a whole lot of patience for big misses in the numbers. The loss this quarter was primarily attributed to a foreign tax charge of $35 million, which is unusual and somewhat suspicious in and of itself.
On the plus side, quarterly revenues were way up. They came in at just over $500 million for the quarter. It blows my mind that you can do $500 million in revenues for a quarter - essentially $2 billion a year - and still lose money. Something's definitely rotten in Denmark (or Switzerland, in this particular case).
Can anyone tell me how this company is not one of the best looking short targets around today? What am I missing? They've got competition springing up right, left, and center, and it just looks to me like the IPO money went into a black hole. Does anyone really think this company is going to be around in five years?
Same thing will happen to facebook.
You have a company that is hyped in value by bankers but a company that produced nothing sustainable to sell.
These investors dug their own grave by jumping on those "virtual" companies bandwagon. Let the accounting shenanigans. It's too bad that white collar thieves don't go to jail here anymore otherwise the people who are cooking the books should pave their way to jail.
Im really curious how they can loose money? Its not like they really produce anything. The cupons that they sell are discounted by the company that issues the cupon. Your telling me that they have over 2 billion dollars a year in costs? WTF I could run this shit out of my house ny employing one person in every region to go and sign up businesses. Not only does something stink, it stinks worse then the train of gas I was droping in my office yesterday afternoon. Let me tell you it wasnt pretty, I had to close my door and my eyes started to water up.
You guys beat me to it. I'm a little blown away at the huge expenses of this company. You'd think they were a heavy manufacturing company of military jets with the amount of expenses they have, not an online discount store. It truly boggles the mind.
I'm wrong a lot, but on Groupon I was dead on--a model with no barriers to entry = terrible investment idea for stock purchasers. I can't believe intelligent, wealthy adults placed their bets on Groupon.
Largest Ponzi in history?
The fundamental problem with Groupon is that customers have no brand loyalty when it comes to daily deals. I'm predicting a race to the bottom as me-too knockoffs promote more and more business-friendly deals, undercutting the onerous terms that Groupon once commanded.
It should be noted that I have a pretty strong bias against the Groupon business model in general. IMO, they are a glorified financial services company masquerading as a coupon/marketing business. Many small business owners fail to understand the financial impact that doing a Groupon deal can have on their business (their own fault, yes - but that doesn't mean it's not misleading).
Or, best of all, masquerading as a "tech company".
No barriers to entry, no reason for customers to stay loyal, and lack of returning vendors = unsustainable business model.
Their real problem is their marketing costs, they spend a fortune trying to win new customers who then prove to be one-off customers....
A shitty business and I'm glad the VC we invested in got the hell out of it before it listed!!
I don't remember the exact numbers quoted yesterday, but Bloomberg said it costs them ~$44 to acquire a new subscriber and they make ~$16 per subscriber.
Also, during their filings they kept spouting off (even to the SEC) how important their subscriber #s are. Well those numbers must blow now because they didn't even disclose them in their press release.
I say it everytime these companies come up - I stay the hell away. Groupon, LinkedIn, etc... I have no use for these companies.
I bought up a bunch of puts on this turdmonster before the close yesterday. I'm not sure whether to hold through next week or not. Such a POS business model.
Hi I am going to sell my coupons that come in the mail for 10 dollars each cupon. Any takers?
They're sitting on $1BN in cash raised in the IPO without any idea of how they're gonna spend it. They're complaining about this 1600% tax rate (whatever that is) on overseas offices. Time to group on, and short the hell out.
Google close to clinching Groupon Deal - Advisors ? (Originally Posted: 12/01/2010)
Does anyone know who Google and Groupon have retained on this potential deal ? Any intelligence would be very helpful.
Some of these valuations are unbelievable. $6 billion for Groupon:
http://www.bloomberg.com/news/2010-11-30/google-said-to-near-agreement-…
and Twitter turned their noses up at $4 billion?
http://www.businessinsider.com/google-offered-to-buy-twitter-for-25-4-b…
Groupon is making a ton of cash (somewhere around $350-500 mill in yearly revenues). Its expenses aren't as lean as other web startups (has something like 2,500 sales staff), but that's still an impressive bit of revenue.
Groupon 2.0 looks pretty awesome as well: http://techcrunch.com/2010/12/01/groupon/
The company is only 2 years old....I think we are all getting into the wrong industry.
This move is pure win.
For those with Groupon equity, of course.
Supposedly Morgan Stanley is the buyside advisor and Allen & Co. is the sellside. Nice payday for Allen & Co.
I guess Andrew Mason makes the Forbes list of billionaires at the ripe old age of 30.
Fucker.
I read an article from Forbes that mentioned Groupon as the fastest growing company ever. It only took 18 months for the company to reach a valuation of $1BN. I found out about Groupon from my mom who has never been on the forefront of the web/technology. I definitely think that speaks volumes as well because the user base of Groupon is fairly broad although it does have a facebook bias to the younger generation.
Facebook is reportedly worth around $30BN and they only do about $800MM of revenue. Out of the two I'd say that Groupon is certainly a much better bet and has plenty of room to go.
Sucharia Mulpuru = HATER
http://dealbook.nytimes.com/2010/11/30/googles-gambit-for-groupon-raise…
Sucharia Mulpuru = HATER
http://dealbook.nytimes.com/2010/11/30/googles-gambit-for-groupon-raise…]
I would bet good money that if Sucharia had an equity investment in Groupon he wouldn't be trying to negotiate with Google for a lower valuation. Sounds like a sore loser to me.
Regards
I saw Mason talk a few weeks ago - he said that they targeted moms/non-techy types at first intentionally, to stay out of the TechCrunch limelight and avoid clones as long as possible.
Not sure if this would make Mason a billionaire though, Groupon has taken a ton of VC money ($171 mill) ==> lots of dilution.
LOL. I don't know if he's a hater. I joined Groupon and about a week later I found out about LivingSocial, so I also started using them. Then about a week later, I found out about Bloomspot. If I were an investor, I'd be very reluctant to invest in what could be the next MySpace (i.e. trendy, dominant site that was knocked off by a better one). The guy is right--if I had the technical knowledge (which I don't), I could EASILY start a competitor to Groupon in my own area. EASILY. The business model is brilliant but not rocket science.
Sometimes the simplest ideas are the best and most effective businesses
there are like 5+ sites like this already for my area, it's not that bad cause you just sign up for all of them and just get more deals goin
off the top of my head
groupon.com livingsocial.com dealfind.com wagjag.com fabfind.com
etc
The thing is, it's kind of a zero-sum game. If I have x number of dollars to spend and I'm getting deals from 5 different sites, I'm naturally going to spend less on each individual site. Now, I'm not saying revenue will be lower going forward--after all, as a percentage of people out there, only a small % use each site. There's a lot of room to grow for users. But that's naturally the problem--people with limited resources to spend (which is why they're using these sites in the first place).
I read somewhere that Mason still has about a 30% stake in the company.
He started the company in November 2008. Unbelievable.
Techcrunch is filled with a bunch of hungry web entrepreneurs who are quick to strike down any idea that isn't "web 2.0 savvy enough" but shortly thereafter copycat it as best they can. I don't blame Mason's strategy of avoiding those types.
Haha. Interesting point on people's spending habits. In any event, I'm rooting for Groupon. I actually like their services. I'm just not sold on their ability to become the "facebook" of savings. Obviously, a lot smarter and wealthier people are willing to make that bet, so I'm looking forward to eating some crow.
Groupon Hurting in China (Originally Posted: 08/25/2011)
Here in the USA the internet world was shaken by the resignation of Steve Jobs, the CEO of Apple. However, another internet company was making big news on the other side of the world. Groupon, the popular and fast growing website, found itself in a bit of trouble in China. A reported “cash crunch” caused Groupon to make severe cuts in their offices and employees.
Groupon insists that this was simply a lack of fresh funds and a momentary problem but the cuts raise doubts about the effectiveness of the company overseas in a place where tech giants like yahoo have already failed.
While I still think that investors will go nuts on Groupon’s IPO that is coming up in a couple of weeks, the news in China certainly does not bode well for the company’s future. What do you think monkeys, is will the IPO be crazy? Is the Groupon model sustainable in not only China but the US as well?
straight into the toilet...is where this company is going...
Anyone not in on Pre-IPO price will crash and burn.
I honestly don't know a single person that uses Group-on. People don't want to spend money for new products/services outside of their daily life. If they offered discounts on useful shit that would be awesome in this economy,but its not the case.
This comes down to the crux why I believe groupon is like a tamagochi. Useful shit sells itself, you don't need groupon. Companies use groupon to get repeat business, visitor attractions, restaurants, and they will probably lose money on the first groupon sale given how much discount is given and how much money is given to the company. That said, I dont understand who's funding this.
I use Groupon/Living Social when it is worthwhile.
The idea that people don't have money to spend is absurd. I'm single and don't have much student loan debt, so Groupon/Living Social comes in handy when I want my disposable income to go a little further.
I try not to invest in companies that lose money and haven't presented a credible plan for dominance in a business that has an extremely low barrier to entry. And speaking broadly of tech IPOs- they then have the audacity to charge you premiums higher than the best-run companies in the world. For example, as of this posting, LinkedIn has a negative 939 P/E ratio- how do you make money investing in nonsense like that? Benjamin Graham described it best- mostly likely, IPOs are a scam- don't buy them. And even if you've done your homework, don't buy them.
interesting to see that google, yahoo and ebay "have also seen their China ventures go sour"
re: imnottheonlyone - i know a ton of people that use/keep track of living social / groupon deals
I ignore 99.9% of deals on Groupon/Living Social. It's always yoga classes, wine tasting tours, tanning salons, useless deals like that. The best deal I've seen on Groupon was one for 8 Quizno's subs over the course of two months for $22. That was a solid deal, except I'll never go to Quizno's again after that period. I feel that Groupon is a great idea on paper, but fails to deliver day after day. Example: I'm out in LA, feeling hungry, and I'm looking for a bite to eat. Pull out the iPhone, check Groupon/Living Social/Coupon Website #255 to find a good deal...Oh great, there aren't any useful deals, but there is a 50% discount at the neighborhood dog grooming shop. This situation has happened to be time and time again.
I have always believed that the best Groupon model would be hyperlocal advertising to your phone exactly as you described. It fits the model of advertising to potential customers in your area who you can convert into a regular. There is no business incentive for a merchant to sell a Groupon for one time events like skydiving, etc. Over the next few years, I think you're going to see Groupon/LivingSocial lose serious market share to LBS-enabled startups. Or a completely online based model, ie an AdWords driven daily deal. Groupon's biggest cost is marketing/sales. Fire every sales person and let google do it. Yes, I realize there are many problems with the latter model, but still.
Groupon IPO - maybe a short after the hype? (Originally Posted: 11/04/2011)
See the video below of Eric Jackson's thoughts on the new Groupon IPO. He makes a few good points about Groupon that most of us have already noticed. He talks about how Groupon has a business model that can be easily copied and how the company is trying to show a profit by cutting advertising expenses.
This is most likely going to cause revenue growth to slow which will make many investors unhappy. Other key mentions are that they have an unproven CEO, accounting measures that seem to keep changing (change in counting revenue), and a disastrous venture into China. Maybe a short when all the hype has subsided?
They are only floating 5% of the stock, correct? Going to be costly to short. I still feel like they will be an epic fail.
yeah its def gonna be a hard borrow....but if i could get a cheap rate id short the shit out of it
me too.
I agree with the sentiment that the company is way overhyped, but shorting a STOCK like this is dangerous. I mean sure, it might eventually fail, but in the meantime how long are you willing to hold onto that short? If the stock continues to climb you going to hold on and eat those losses? 20%, 40%, 100% How long would you be willing to hold those losses that is the question.
^THIS
I don't like Groupon long-term, but you can't short it right now
Ya seriously it's quite funny that even after the .com bubble the market will still buy into companies that they have no clue about how they are going to earn profit. Groupon will very likely burst but the fools may keep that bubble pumping for a good while before they finally learn their lesson....again.
Just look at pandora and how that company behaved, it is essentially the same model and business as groupon. It's worthless has no damn earnings and I at least have no idea how it will become profitable but in the meantime it's being purchased. For reasons like this I do somewhat support Peter Lynch, buy what you know.
I dont think its gonna climb for long...my bet is that next week it plummets..and by next week i mean monday, when ppl realize "oh fuck! i bought that?"
LOL I love when posters who don't know anything about markets decide to post on here about IPO's. Ever time a new IPO comes up, there is a thread made by some rookie monkey.
You know what I would short? The combined knowledge of everyone who has posted on this thread.
Says the guy who doesnt even work in them...go back to your cubicle
Really? Because I would bet on the fact that you're another analyst slave who has all his prestige and assets stored in the bank he flails around in while trying to stay afloat.
Get back to drawing up those shitty earnings analysis.
I believe that time has shown that the only "rookie monkey" on this forum is you. Thanks for the monkey shit jackass. I hope to god you bought at the IPO.
Pandora at least has the potential to be profitable in the somewhat near future. I think Pandora in the $8-10 range could be a decent buy.
I would never touch Groupon though. Even if I want to short it, like everyone else has mentioned, it is too damn expensive and not even possible at the moment. Once restricted shares are allowed to be dumped into the market, that may be the time.
This IPO is a con for people to cash out while they still can. Awful business model. I am curious to see how long it can stay alive. Why the hell are they considered a tech company....because it operates via the inter webs?
I think it has to do with having glass cubicles in the office, or something like that.
Regards
What did they just release? Something like $813 million out of the latest $930 million capital raising was paid out to insiders? And a mere $127 million used for working capital when their burn-rate is hundreds of millions in losses per quarter?
Yah ... great business model.
Sincerely,
JT Marlin (Groupon's underwriter).
What did they just release? Something like $813 million out of the latest $930 million capital raising was paid out to insiders? And a mere $127 million used for working capital when their burn-rate is hundreds of millions in losses per quarter?
Yah ... great business model.
Sincerely,
JT Marlin (Groupon's underwriter).
Hahaha
Wait for options to come into play.
Should have sold to Google.
the barriers to entry are too low and the marketing costs too high. heard that the cash raised in the ipo only covers the marketing costs for about a year or so... agree with the comment above. get your hands on some puts...
I'm not an expert by any means but I cannot comprehend how an internet coupon company is the second largest internet IPO in history. Just doesn't make sense.
Truth
This article take in account potential future cash flows of the company. To me, based on my idea of the soundness of groupon's business model and this analysis, this company cannot stay higher than 20 bucks.
http://www.businessinsider.com/is-groupon-stock-overvalued-2011
Groupon's Accounting Blunders (Originally Posted: 04/01/2012)
Whoops! Groupon's woes continue as share prices plummet. But seriously though, I am at the point where Groupon's e-mails are filtered to a separate folder in GMail, and I know the next step is to straight up unsubscribe from all of their deals.
I've used Groupon one time -- to donate $20 on Memorial Day to Veteran's mental health benefits. The overwhelming majority of their deals are straight awful, and it's funny that this article mentions the laser eye surgery deal (one that I have seen probably two dozen times in my Inbox over the past year or so).
What's Groupon's deal? Are they simply in a rough spot before the company matures, or are they actually providing a "product" that no one is interested in? The latter seems to be how most people feel...
Link to article
.
If Groupon has bad deals, LivingSocial is barely even speakable.
I still don't understand how LivingSocial is a thing.
Look out below - to get auditors to issue that type of opinion, your back office has to be in absolute shambles.
all the deals i got are spa....
no wonder they are failing
and their restaurant deals are shitty
accounting improprieties can be a killer
what do you guys think of Google Offers ?
I think the problem with all of these mainstream deal sites is the fact that they are just that -- mainstream. As such, the deals they post can't be that extravagant, nor can they be price mistakes, etc. Sites like FatWallet and Slickdeals post by far the best deals on the net, but cater to a much older crowd...LivingSocial, Groupon, etc. are the yuppie, 20-something way of being frugal while concurrently being stylish.
Just my $0.02.
this is all just racialisms against the intranets
They've been handing out the coupon books to kindergarten students since 1980, nothing new here. Short.
Groupon Gloom: Deal of the day or Death Spiral? (Originally Posted: 08/27/2012)
mod note: this was originally posted on 8/24/2012
In keeping with this week's theme of revisiting ghosts of valuations past, I decided to take a look at another fallen angel, Groupon. The stock has collapsed to $4.44 from its post-IPO high of $29 and investors and employees seem to be fleeing from the exits. If you are a contrarian with a strong stomach, it would like the stars are aligned for some bottom fishing but is Groupon a buy, even at this discounted price?
To make this assessment, I decided to take a look at my posts on Groupon from last year:
A year later, it is clear that I under estimated how quickly any competitive advantages that Groupon's first mover status gave them would be eroded. This is clear not only from perusing my email box every morning (and removing the dozen emails from different deal-of-the-day purveyors) but also in Groupon's financial results. As the most recent earnings report makes clear, revenue growth has slowed, profitability has lagged and the stock price collapse is in reaction these changes.
As I revisited my valuation, as with Facebook, I had to caution myself not to overreact, but the news, as I see it, is far more dire for Groupon than it is for Facebook. While Facebook's results were disappointing in terms of converting potential to profits quickly, the potential (from their vast user base and the information they have on these users) still remains. In Groupon's case, where the business model was clearer at the time of the IPO, the business model has collapsed and it is difficult to see what the company can do to set itself apart from the competition and make money at the same time. As a result, the changes I made in my Groupon valuation are more dramatic than the changes I made in my Facebook valuation. My base year numbers reflect their most recent quarterly filing, with trailing 12-month revenues of $1.965 billion and operating income of $71 million. My forecasted revenue growth rate is 25% (leading to revenues in 2022 of $10.3 billion, as contrasted with my earlier forecast of $25.4 billion), my target margin is 12% (down from my year-ago estimate of 23%) and my sales/capital ratio is now down to 1.25 (from a year-ago estimate of 2.00). The end result is a value per share of $4.07, which makes the stock, at best, a fairly priced stock. In fact, if you bring in the likelihood that the firm may not make it through its growth pains in the spreadsheet, the value per share drops even further. As with the Facebook valuation, you can download my spreadsheet and put your own estimates in... I have a shared Google spreadsheet for those of you who want to share your numbers...
There are two broader point that are worth making here.
Death spiral.
shoulda sold to google for 5 bil 2 years back.
I think it was over 6billion; point taken though.
I wouldn't buy it. I was confused when they went public, everything about the company has seemed strange from the beginning. What kind of company raises $950M and then gives nearly all of the money to the founders in cash - before they go public? Am I the only person who thought that was a bad sign, especially for a very cash dependent growth company?
^ Wasn't it $8 billion?
I believe it was $6Bn. I believe it was a majority cash deal also. GOOG stock has done pretty well over the last year so that just adds salt to an already sore wound.
i would vote death spiral as well. But with $1.2 billion in cash i'm sure they will survive the near term as they approach the apocalypse with Zynga. But pretty sure neither companies will go bankrupt cuz as the stock price drops a facebook will come in and snatch them for $1-2 billion cash.
Zynga has a future, Grupon no.
Groupon (Originally Posted: 02/07/2011)
How would you guys value Groupon?
What metrics, what models (if any) that you would use, etc.
in other words, how did google value them at 6 billion? google is starting their own google offers site that competes with groupon- groupon knew that google would try and emulate it so why would they decline? did they have somethign special up their sleeve that no body knows aboue?
interested in this as well
There is no traditional valuation when it comes to tech companies like Groupon as they are disruptive, have a new business model and are growing very quickly. Value that Google proposes is might not even be based on financial valuation but strategic value or their view of the market, or a multiple of the Groupon revenues.
Groupon = $25B? (Originally Posted: 03/17/2011)
Groupon is said to be considering an IPO in the 25 Billion dollar range. This is the first I have heard of it being this high. Any thoughts?
Groupon Is Said to Discuss IPO Valuation of Up to $25 Billion
outrageously over valued.
^ I'm thinking that the Groupon IPO will follow the same trajectory as a groupon promotion....I'll be buying but then selling just as fast
Or, like a groupon, it's worth nothing after six months.
Feels crazy, but without financials it's hard to really judge. I can't believe they have that much more growth ahead of them (barring consolidation of more niche players in the daily deal market). To say nothing of the fact that small businesses who theoretically benefit the most from exposure aren't necessarily in love with the idea: http://posiescafe.com/wp/?p=316 (anecdotal, but still).
Got to be honest, I think this is one of the most legit web 3.0 (whatever we are calling all this social bullshit) businesses to have emerged in the last 3 - 5 years. It's a massive cash generating machine with immense size and is already doing ~1 billion in revenue (should hit over that this year.) Yes, it's a simple business model, but it's also a pretty awesome one that literally just pumps out cash.
Meanwhile, Twitter is barely breaking even and it's "worth" $3.7 billion or some such shit. What a joke.
King, I would agree if the business model weren't so easy to replicate and they have a history of treating the business owners that use their service like shit, providing motivation for them to go elsewhere (like livingsocial)
i'm trying to figure though what differentiates Groupon from all the other companies that do the same thing they do? like somebody else said Living social
first mover advantage
the valuation is basically saying that first mover advantage is worth $25 billion - the value of the next competitor
Imo, the business model is genius, but the genius aspect of it is what makes it so easily copied. Margins can easily get squeezed.
It's easily copied in theory, I really don't think it's easy to compete with their massive size in practice. The sheer amount of legitimate boots-on-the-ground they need for the business to work at scale is what makes it tough to just copy it and run with it. The number of copy writers, people to go out and source new deals, shit just doesn't happen overnight. I think there is room for some super specialized clones, but I really don't think this is a business that can just be toppled overnight by a competing clone.
Groupon's probably the first company to monetize the whole web 2.0-3.0 thing in a very successful way. But as everyone is saying, the idea could easily be replicated and there are some signs that customers on the business side may be tough to retain (http://tinyurl.com/4f3skbr). The founders should have taken the $6 Billion and ran. From start to exit (2 years), that would probably have been the most successful startup of all time in terms of return. It'll probably take Facebook less time to do to Groupon what Amazon did to Netflix.
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