Tuesday, October 4, 2011
How Much Is Groupon Worth To Investors?
The long discussed IPO for Groupon seems to have been delayed again. Perhaps it will never
happen. While the concept got a huge amount of media attention at the outset, the idea of selling deeply
discounted products and services, to large numbers of individuals, using social media, can easily be copied. According to
one report there are now some 400 copycat services worldwide. But Groupon was the first and remains the
best known of the services. It has built a category and a brand, and certainly that is worth something.
8:47 pm edt
But perhaps there is problem here that’s more fundamental than the IPO pricing.
Thanks to the internet, Groupon has been able to gain huge exposure. Consumers who would never think
of dining at a particular restaurant or buying an expensive item have become aware and have jumped at the opportunity.
They are buying the deals, often at half price (or better). On their part marketers
have been eager to gain the visibility and the opportunity to introduce new customers to their product or service.
Sounds like a win-win.
But now we hearing of marketers
reporting that the cost is too high, and the payback is too low. While they chased the shiny new object
with the hope of generating hundreds of new customers who would come back again and again and deliver a handsome payback on
the Groupon investment, they are getting: 1) deal seekers who enjoy the experience but don’t return (perhaps moving
on to the next deeply discounted deal), or 2) existing customers who would have been doing business with them anyway, but paying