Groupon's biggest offer yet - $1 billion for a slice of the company


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Last year, Groupon took some heat in the financial press for turning down a $6 billion buyout offer from Google (GOOG), which just started its own daily deals program, Google Offers .

That decision is looking a bit more savvy now that Groupon has filed with the Securities and Exchange Commission for its initial public offering, putting down a "placeholder" figure of $750 million. According to the Wall Street Journal , that number could easily rise to over $1 billion, depending on the whims of the market, giving Groupon a potential value of $20 billion.

For an idea of what the market sentiment might look like, it's informative to look at the case of LinkedIn(LNKD), a professional social networking site that commands a fraction of the user base that Facebook holds.

Its IPO last month  valued shares of the company at $45, but in the first day of trading they quickly spiked to over $100. Since then, the shares have declined about 15 percent, but it's a still a bubbly-looking valuation.

Of course, Groupon has a somewhat more stable revenue model than LinkedIn's premium subscriptions and advertising, and the two-and-a-half-year-old company has seen stunning revenue growth. In 2009, it took in just over $30 million; in the first quarter of 2011 it posted $644.7 million in revenues. However, it has so far failed to turn a profit, though its $413.4 million loss last year was partially due to major acquisitions of similar businesses.

The upsides lie in these facts: Groupon is growing fast, it has major brand-name recognition and it taps directly into the heart of the current mania for social networking. On the downside, Google, Facebook, LivingSocial and a number of scrappy startups are aiming for a piece of Groupon's pie, the astonishing growth rate creates serious organizational and infrastructure challenges, and there's nothing particularly unique or special about Groupon's service. It just happens to be one of the first entrants into its particular field, and it distinguishes itself mostly through its sales team, brand recognition and clever copy.

As far as the larger Web Bubble 2.0: A billion dollars here, a billion dollars there and pretty soon, you're talking real money.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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Daniel Pereira

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