Friday, 3 June 2011

Groupon gets the Support Needed to Succeed in IPO

It looks as if my sign up yesterday tipped the balance and the Groupon executives decided that my support was the crucial last step required to go public.

Groupon will raise $750m which is fairly urgently required as their marketing bills are over $200m to date and they are accruing over $400m+ in losses on $600m+ of revenues last quarter. It costs them around $61m to acquire their staggering 152m of customers, most of which are in the US although there are now over 30 countries active. To be fair though, the UK looks limited so far - having said that a cursory check of my mail box reveals a couple of daily offers. Let's hope it isn't for hair removal again in some form or other.

The statistics about this company are astounding and the growth staggering in terms of what has been achieved in just the last year. Revenues abound but with over 7,000 employees already and wafer slim margins on the deals they offer and high cost of customer and offer acquisition, the risks are equally staggering.

And then there's the competition. After all, there is nothing really proprietary about this business idea and model, and now Google Wallet is launching they are at risk from the big guns as well as the clones, who the founder seems to think have no worth.

The clone offerings come from fairly prestigious companies, Amazon among them. The problem here is that the new wave have strong consumer brands, are long term trusted partners of both client and supplier and they have very strong trading figures.

One to watch here in the UK is VoucherCloud which does not operate on a Wallet basis but you can stand in a town centre and get offers pertinent to your physical location via your phone and use them for more practical things than hair or tattoo removal. To be fair, today's London Groupon deal was a meal at Moroccan restaurant as well as tattoo removal (not on the same offer).

Last year, Groupon shunned an offer by Google. This was hailed as either brilliant or daft. This IPO and the subsequent battle for user 'wallet' and supplier offers will rage. Looking at the distribution arms of the rivals like Google and Amazon, I think Groupon might fast become the AOL of an exciting new concept.

Personally, if I were the founders, I would have taken the nice people at Google's money and run. Let them figure out how to keep those big guns out of the market and mop up those enormous losses.

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