I recently came across an article reviewing the current bid that google has made to acquire groupon.
http://blogs.hbr.org/cs/2010/12/groupon_is_google_making_a_6_b.html
The article makes a very good argument about the contrasting effects that groupon has had on the companies using its services. I, for one, have several accounts of friends working at businesses or owning businesses that have incurred huge loses on account of their groupon “shananigan”.
The article, however, doesn’t address the fact that google’s bid for groupon seems quite disproportionate to its real value. With close to ~200 million dollars in equity, and a fair amount of debt, Groupon’s added value seems to come from the name it has created for itself and its steady customer base (myself included). Their brand, however, has come under fire in recent days. More and more costumers realize that there are catches for the coupons of businesses that designed their groupon strategy well. The bargains for the consumer, however, come from businesses that have not strategized the use of their discounts.a As more of these companies realize the losses associated with the discount, there will be less “bargains” for the consumer.
In my opinion, Groupon has had a boom in the last two years and has experience tremendous amount of growth (hence google’s overly enthusiastic 6 billion dollar bid to acquire them). However, as the implementation of the idea behind groupon is refined, its costumer base will stabilize as less people will take advantage of their services and less businesses will post their coupons online. Furthermore, as competitors like livingsocial, gilt city and buywithme enter the race, groupon’s market share might be affected. The service is easily replicable at a local level, which would hurt groupon’s expansion into new areas (and the biggest cause for it’s rapid growth rate).
If I were groupon, I’d take the bid before google comes back to its senses and make a more conservative offer.