Just a few short months ago the online discount service Groupon famously turned down an offer from Google.
The news raised more than a few eyebrows because of the amount of money the search giant offered to acquire the online group coupon service – a mind-boggling $6 billion. Yes, that’s billion. With a B.
If you don’t already know what Groupon is, it works like this:
1 – A business offers a deal for its products or services with at least 50% off (thought discounts can be up to 90%).
2 – Groupon sends the offer round its database of users and they are asked to share it widely on social networks such as Facebook and Twitter.
3 – The business sets the number of customers needed to make the deal worthwhile for it – and the offer is only valid when that number is reached.
4 – Bargain hunters flock to your store/restaurant/business in an intensive, short period to redeem their vouchers.
The service so far is an astonishingly successful, runaway success story.
Baby faced boss man Andrew Stone decided not to check out with a hefty chunk of Google change in his hipper. Which suggests he is super confident the service has a long-term future.
Perhaps unsurprising, since Groupon had revenues of $760 million in 2010; it’s headed for $4 billion in revenues this year; and has 70 million global subscribers.
The latest news on Groupon is that it is going to float on the US stockmarket – what is referred to in the states as an Initial Public Offering (IPO).
Bloomberg has reported Groupon is speaking to bankers about an IPO valuation of $25 billion (yes, the B-word again). That’s higher than the $23 billion Google achieved when it went through an IPO and became a publicly traded company, subject to market regulation.
His question was met with silence and Jarvis added: “Then why is it so big? I don’t get it.”
I share his bafflement. I struggle to understand how businesses can sell product at a fraction of the usual price and from what little money they take, then have to pay Groupon.
I also have doubts about how many of those bargain-hunters will convert to long-term customers.
When news of the Groupon IPO broke I put a question out on LinkedIn asking if other people shared my suspicion that it was grossly over-valued and likely to pop. Turns out quite a few long term web watchers and smart people whose opinion I value are equally bemused by Groupon’s success.
Maybe we have a shared cyncisim? Certainly I’ve always adhered to the view that if something appears too good to be true, then it almost certainly isn’t true.
I can’t shake that feeling about Groupon – but then, I’ve never used it, either as a business or a customer.
So I’d love to hear from companies or businesses which have used the service repeatedly and found it a great way to build a new, engaged and loyal customer base.
Likewise I’d be keen to hear from any business owner or operator who has used Groupon – and definitely won’t be hurrying back to use it again.
If you have any thoughts or experiences to share, the comment section below awaits you!