Tuesday, October 18, 2011
Groupon Is Officially Toast
Once valued at $30B, Groupon's IPO is struggling to be valued at $10B.
How did it get so bad?
My prediction is coming true: Groupon will not only the fastest company to generate $1b in revenues, but also to hit $1b in sales and go bankrupt.
1. There is NO barrier to entry
2. The business model just doesnt work in the long run
3. The companies that already have access to millions of online users and touch them every day (Facebook, Google, Amazon) waited to see what works.
I think everyone knew Groupon and the group buying space was in a bubble, nobody wanted to admit it though.
FaceBook and Twitter were showing nutty revenue growth and Wall Street wanted ANYTHING Internet 2.0ish to bring to market.
Andrew Sorkin discussses the "Red Flags Missed at Groupon"
Here's a beauty:
And Groupon’s filing shows that when the company privately raised $950 million in a pre-I.P.O. round in January, it paid out $810 million of that to its investors and employees, a red flag for any investor. (Mr. Lefkofsky and his wife took home about $319 million of the total.)(check please!)
Perhaps the Occupy Wall St. people should take a look at this: The cynical reason that the banks stood by Groupon and its accounting shenanigans is most likely the expected fees from the offering.
Even if Groupon’s I.P.O. values the company at $10 billion instead of $30 billion, the banks will probably walk away with hundreds of millions of dollars.
What happens next?
Perhaps Groupon will generate revenue from licensing their IP, but Tippr seems to be taking a stand against that. Then there's pesky mobile application issue. What happens when consumers want real time group buying specials delivered to their mobile based on their location? Groupon and ALL of the group buying players might have a problem with that from these guys. Don't know if it makes a difference yet, but one of the most successful licensing powerhouses in the world agreed to manage their IP portfolio.
Group buying is just a commodity like business but that doesnt mean it can't be profitable. But to make money with it, you need to be different than the rest.
Here's how to make a group buying campaign work
The tool that turned $10,000 into $2,800,000 in 2 years. HowToFindBigStocks.com