OPA Intelligence Reports

Posted in News on 12/17/2012 By Mark Glaser & Courtney Lowery Cowgill

Groupon: The cautionary tale

The story of Groupon – once one of hope and promise – has become one of woe and perhaps, of caution. The online daily deal service went public in 2011 (valued then at $10 billion), along with a gaggle of other, equally disappointing internet IPOs such as Zynga and Facebook. At the time, it was a pioneer of a promising new advertising venue. But then, everyone jumped on the daily deal bandwagon and the promise Groupon held diminished quickly. It’s tried to reinvent itself, but continues to slide. It’s now down 79 percent this year alone and even with a small rebound recently with takeover rumors, its future is not looking bright. Some have even started to say that Groupon’s IPO was part of a Silicon Valley bubble, one that is now quickly deflating. Marc Andreessen, however, says Silicon Valley is in a “technology depression” and that the “bubble” wasn’t a bubble at all. “If it’s a bubble, it was a bubble that was limited to four companies, that was limited to the private side,” he said at the New York Times DealBook conference.

Still, Groupon’s story sure sounds like a bubble bursting. Just before the IPO, Google offered $6 billion for Groupon. Today, the company is valued at about $2.8 billion. But even at less than half the price, will Google – or anyone for that matter – be remotely interested in buying it? Analysts aren’t painting a very rosy picture: revenue slowing to 0.6 percent growth in 2015, down from 45 percent in 2012. Sameet Sinha, a San Francisco-based analyst at B. Riley, tells Bloomberg, “Their existing customers are buying less and less. They have no technology really to talk about. Their sales force is declining. Frankly, what are you buying it for?”