The groupon bubble

May 18

I use groupon (City deals in Ireland) a bit. I travel with work and the hotel deals are excellent. Too good in fact when you consider the hotels get on average 50% of what grouponyou pay, and only after the guest has stayed. I’m sure the publicity is great for the hotels and if you have a nice stay your likely to go back.

Except in my case and I suspect many others I stay in the hotel and likely wont go back unless theres another silly priced deal.

Reuters say the IPO may value the company at $15 – $20bn , Groupon does not publish financial information but say they have been profitable since 2009. Obviously a $15Bn valuation is significant but whats it based on? Actual profit or crazy future profit expectations.

Consider Gilt groupe (another deals website)which a  group of VCs recently invested $138 million in, giving the company a valuation of $1 billion despite the fact that the site hasn’t made a profit since its launch in 2007

The entire group buying phenomenon is fascinating and looking very like the original dot-com in which scores of start-ups launched themselves into a marketplace only to see the market suddenly retract.

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