Twitter Summary: Groupon goes public next week projecting a valuation of 5 time the 2012 projected sales.
Reflection: Groupon will be going public on November 4th as they are seeking a valuation that is much higher than Microsoft Corp. and Amazon.com. They project their sales next year to be 2.1 billion and are kicking things off at $17-18/share. All that being said, Groupon believes that they are more worthy, and or a bigger player than Amazon.com, the largest online retailer in the world.
I think investors are excited to jump on board with this business model, but I am skeptical of it's financial strength. They do have a great advantage of a massive customer base and being the first coupon site to enter the market, but will that be enough? How far can this company go?Where is there future heading? Do they have the right people to steer the ship in the right direction?
These questions strongly relate to midos business model. We rely on other deal sites to compete with each other, compete with consumers, and with retailers so that we can filter coupons to the individuals needs. For that particular alternative in mido, it may not be beneficial for Groupon to get so big so that they control the market share.
-Coleton Thielmann
Article: http://www.businessweek.com/news/2011-10-26/groupon-ipo-said-to-ask-triple-amazon-s-price-to-sales-ratio.html
The Groupon business model is parasitic in nature. It only encourages desperate or start up business to make outlandish offers with the promise of return business. The problem is that once the public becomes accustomed to the outlandish offerings they become the norm and regular healthy businesses suffer from the constant stream of sickly businesses undercutting them in the hopes of gaining a market share they otherwise would not be able to achieve. It becomes a vicious cycle as they then lose any progress they made to other business as they make the same type of ridiculous offers.
ReplyDeleteI think if you guys can alter your model in such a way as to minimize this vicious cycle, your model would be more sustainable than Groupon's.