Groupon – Gauged For Glory or Set For Suicide?
With high unemployment, at the tail end of a recession and a World where online eCommerce shopping is swiftly approaching the high street, it seems obvious that consumers would turn to online offer sites. There has been a recent and dramatic rise over the last 12 months of reseller websites offering vouchers and discounts that give consumers top quality goods at one tenth of the price, which is leading online shoppers to ask, if we can get something for 10% of the RRP, why pay more? The market leader Groupon now has more than 83 million subscribers with revenue of $644.7 million in the first quarter of this year and with Living Social and many other copies following closely and Groupon itself preparing its IPO, the questions arises are we witnessing a revolution for eCommerce monetisation for businesses or is this tomorrow’s short lived craze?
Groupon is the latest online business to tout an impending public sale after the recently successful LinkedIn IPO, and with the gossip still rife about a similar sale of Twitter. While this is a definite declaration of the success of the platform and another testament to second dot-com boom sceptics are pointing at recent leaks which illustrate a lack of profitability and issues over the legality of the ‘Groupons’ they provide. Despite these legal issues surrounding the expiration dates of the coupons, and the problems associated with customers being unable to redeem the voucher due to liquidation of the business, Groupon have lead the charge of discount sites online, with competitor LivingSocial biting at its ankles. Worrying predictions of a second dot-com bust after significantly inflated valuations have been placed on online businesses does demonstrate the requirement for generating effective streams of revenue for companies online.
The question remains whether Groupon will be able to live up to dramatic expectations, or will it share the same fate as Pets.com who managed to drop from a valuation of 10 Billion to bankruptcy in just 18 months? The future is not certain for any newly floated business, but a move towards IPOs does seem to be the logical next step for many of the big players online, reflected by the rumours that Facebook will join the share market next year. With shares available everyone wants a piece of the pie and it looks as though there is going to be more than enough to go around.