It seems like just about two years ago Groupon was a barely known company outside of its area origination in Chicago. Fast-forward two years, and now Groupon reportedly talks with Goldman Sachs bankers about a possible initial public offering that could value the company at close to $25 billion after it reportedly turned down the $6 bill offer from Google. However, is groupon realy worth $25 billion? Many question as to whether or not that is so; some say that $6 bill that Google offered a few months ago was way too much.
Groupon, the Chicago-based start-up, was founded in 2008 as an ultimate social shopping site that connected consumers to local deals. Ever since then, the company has enjoyed a meteoric rise. According to DealBook, at the end of December 2009, the company's payroll numbered 124 people; today it has a global work force of more than 5,900. To date, Groupon has about 70 million subscribers in over 500 markets, pretty impressive for a company that is only about two years old. Although Groupon has dominated the daily deal market, its plan of going public with valuation of $25 bill is still up in the air. Why? Google and Facebook heading to enter the deal-of-the-day arena, and they are moving with vigorous spead.
According to BIA/Kelsey's research, there are over 200 players, from small and regional to large and national, in the social-networking-based daily discount arena. "Deal a day has experienced incredible growth during its three-year incubation period beginning in 2008," said Mark Fratrik, vice president of BIA/Kelsey. "We expect this to continue as companies in the space are rapidly adding markets and increasing total user count. They are also subdividing existing metros to provide deals closer to where users live, which we believe will help offset any drop-off that may occur due to consumer fatigue as the novelty of the form fades."
You may wonder, so why get into an already pretty crowded marketplace? If you believe the analysts, the market is big and going to get bigger. The "deal of the day" industry will grow to $3.93 billion in 2015 from $873 million last year.
Facebook has decided to toss its hat into the "deal of the day" ring by expanding its existing Facebook Deals service to include the bargain of the day.The service will let people share discounted offers with their friends, Facebook said in an e-mailed statement. The service will be introduced first in five cities, including Atlanta, San Francisco, San Diego, Dallas and Austin, Texas, said Bloomberg.
Facebook, however, isn't the only giant to be getting its feet wet in the deal-of-the-day business model. Google announced back in January that it would be launching a service called Google Offers, news first reported by Mashable.
It is sure true that Groupon has become a global sensation; however the long term future of the company is still somewhat unpredictable. With 70 million subscribers spread across 500 market Groupon may be on the top of their game, but both Google and Facebook have hundreds of million of regular users that they can easily funnel to their won local deal offereings.
According to the Yahoon news, no one can really predict Groupon's future. It is a hot property now, but some day its trend-setting customers may get "Groupon fatigue" and move on. That doesn't necessarily mean that Groupon will go the way of Napster, Friendster, or MySpace, all of which had meteoric rises before crashing and burning. It might. But it also might dominate, like Amazon. Only time will tell and we are yet to see if turning down the Google deal was a wise move for Groupon.
In my opinion this will be an industry dominated by two or three giants, and my guess is Groupon with its $25 billion IPO, Google thanks to its already powerful business and probably one more player that could be either Facebook or Living Social because of its relationship with Amazon. The question is, are there enough retailers interested in partnering with this giants? Probably at the end the competition between them will be so strong that the ultimate winner will be the business owner, who could be offered several options to choose from.
ReplyDeleteI believe that Groupon is in a very precarious situation and it must act in any way possible to keep its users and vendors happy. With giants like Facebook and Google eyeing the market and competitors, Living Social, receiving huge funding and support from e-commerce giant Amazon, Groupon is not in the position to sit idly in its laurels. These already well established companies with millions of daily users have the capacity and ability to easily replicate Groupons business model into their user interface. Google or Facebook could easily replace Groupon due to their high traffic and heavy day to day use by their users. The only choice Groupon has is to do the digital coupons better than anyone else in order to compete in a highly lucrative and saturated market.
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