I’ve been on a bit of a Groupon kick lately because of all the attention it has been receiving not only in the media but also by the various competitors that are taking aim at it. On the competition side you have a huge group that includes some well-known names such as Living Social. Both Facebook and Google, two juggernauts with massive financial clout, are looking at offering similar group buying deals to their users. Despite the competition the company is hoping to go public with a massive $25 billion dollar IPO sometime this year.
As I scrolled through the various blog posts and article on the subject, I am still amazed that something so simple could be worth so much. Coupons have been around forever and even the concept of group buying is not new. What Groupon did was come up with a quick and easy way to drive large amounts of foot traffic to its advertisers, which allow them to have customers sample their product or service and possibly become repeat visitors. They have done everything fairly well to this point (if you ignore their Super Bowl ads that have been universally panned as being inappropriate) including growing their user base and consistently expanding to new markets.
But $25 billion for a deal website?
Critics are saying this is a clear indication that we are in the midst of a new web and tech bubble that is bound to burst soon. How can Groupon, a company that is only two years old be worth more then Google when it initially went to market? Does their business and management team really have the ability to drive Groupon into the elite class of Internet companies, offering value added services to its advertisers and expanding their offerings for its customer base?
These questions will obviously be answered over the next couple of years but I find it hard to believe that Groupon’s business model is strong enough to fend of its current and future competitors. I could see Facebook Deals dominating the market if they really wanted to and Google already owns the search market that Groupon relied on to grow.
I can say that I am looking very forward to see what happens to see if either I was right with my predictions or completely off base and watch Groupon dominate the world.