Groupon (Told you so)
http://dealbook.nytimes.com/2011/03/17/groupon-valuation-soars-as-possible-i-p-o-nears/
Back around when I posted about Hulu, I was a bit hesitant to post on Groupon since the valuation was iffy at best. Well, is it not best to wait it out and see what can come your way? Many times over companies file for an offering much too early and don't initiate an offering at the correct time during their growth stage. It looks as though Groupon may have it right... or possibly wrong.
For those unfamiliar with how Groupon makes money, and in simple terms, it collects a fee as a percentage of each voucher sold through its website that offers deals tailored to a particular, local area. For example, if you wanted to go out for ice cream in Long Beach, Groupon would find local businesses that have signed up with them for advertising and display them to you - most of which only last a day or so.
The question that I have, and as introduced in the article, is how competitors will line up. It seems to me that this is connecting the most minute, tiny business segments and markets into the digital age. Joe's Burger Shack now has some competitive relevance to the likes of bigger names, leveling the playing field that many small businesses have complained about for so many years. So, how do you value such a company when it is dependent on the demand of small businesses? The sales force that drives the accounts for each area. It's interesting because small, family owned establishments are now playing a bigger role in America at the speed of the internet, finally. So long as Groupon can hold its brand power, and other competitors won't deliberately undercut them, things look bright for the company in terms of growth. This is because there are so many untapped market segments. I'm reminded of the first mover advantage in game theory: The upside rewards/incentive greatly outweigh the downside risk associated with such a rush.
No surprise that Goldman is the lead for this deal.
Back around when I posted about Hulu, I was a bit hesitant to post on Groupon since the valuation was iffy at best. Well, is it not best to wait it out and see what can come your way? Many times over companies file for an offering much too early and don't initiate an offering at the correct time during their growth stage. It looks as though Groupon may have it right... or possibly wrong.
For those unfamiliar with how Groupon makes money, and in simple terms, it collects a fee as a percentage of each voucher sold through its website that offers deals tailored to a particular, local area. For example, if you wanted to go out for ice cream in Long Beach, Groupon would find local businesses that have signed up with them for advertising and display them to you - most of which only last a day or so.
The question that I have, and as introduced in the article, is how competitors will line up. It seems to me that this is connecting the most minute, tiny business segments and markets into the digital age. Joe's Burger Shack now has some competitive relevance to the likes of bigger names, leveling the playing field that many small businesses have complained about for so many years. So, how do you value such a company when it is dependent on the demand of small businesses? The sales force that drives the accounts for each area. It's interesting because small, family owned establishments are now playing a bigger role in America at the speed of the internet, finally. So long as Groupon can hold its brand power, and other competitors won't deliberately undercut them, things look bright for the company in terms of growth. This is because there are so many untapped market segments. I'm reminded of the first mover advantage in game theory: The upside rewards/incentive greatly outweigh the downside risk associated with such a rush.
No surprise that Goldman is the lead for this deal.