So what is Groupon worth? Apparently, $15-billion based on reports about its plans for an IPO.
We’re talking about a company that has sky-rocketed in the past couple of years, riding an idea that, ironically, was all the rage during the original dot-com boom but failed to resonate with consumers.
$15-billion begs a few of questions:
1. What is Groupon’s secret? Are there that many people looking for deals? Has Groupon tapped into the discount seeker in everyone with a service that is simple yet increasingly ubiquitous? Is there really that much interest in bikini waxing and tanning bed offers?
2. Does Groupon have staying power? Sure, it’s the top dog but the group-buying market is fiercely competitive. Everywhere you turn, there’s a new group-buying service banging the discount drum.
3. Can Groupon scale? Unlike many online businesses, Groupon is people-powered. It needs people to reach out to small businesses to feed the enormous appetite for deals. The more Groupon grows, the people it needs to hire.
4. Is Groupon worth $15-billion? If investors are willing to accept this valuation, then it’s worth $15-billion.
The other fascinating thing about Groupon is the impact it will have on the financial dynamics of the social media and high-tech sector. Groupon’s apparent interest in an IPO may just be the “finger in the dyke”. If Groupon does do an IPO and it’s successful, it could release a wave of other social and high-tech IPOs looking to take advantage of the enthusiasm and demand for new investment opportunities.
As much as I don’t want to ruin anyone’s party, investors should try not to get too carried away. History does have a habit of repeating itself so the growing euphoria for online IPOs should be approach with pragmatism.