Why Groupon is Overvalued

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Groupon is overvalued at at $25Billion. Caught up in a whirlwind of Investors all hoping that it will be ‘the one’, the next Youtube or Facebook.

It can’t be because it isn’t anything different to a normal offline business and is easily copied. All software can be copied I hear you say and that’s true. However, the real difference is that in the businesses that have grown to be the biggest in their sector they always offer a Freemium service (as do Groupon) to customers but also actually have a business model for businesses that works economically. Google paid search works. Full stop. You might like the reliance on PPC but it has built many real businesses.

Groupon only offers an opportunity to sell stock at deep discount. Retailers rarely make any money other than covering costs and so the market is limited. I haven’t spken to once retailer that really likes selling thourgh Groupon.

Groupon only has Revenues of £700m. How does that equate to $25Billion valuation with 6000 employees? Only if it can’t be copied – but it can be and has been (they say Living Social will be bigger than Groupon next year). In truth any business with a large email list can offer a Groupon alternative and win (look a Travelzoo’s success with their version of Groupon now valued at $400m). If that’s the case my advice to any business is build your mailing list and then think of what you can flog them other than your main offering. If you do it quick you might find your local key cutting shop is valued at $300m!

Posted via email from steve rushton