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.