Groupon IPO To Stretch the Tech Bubble Further

Friday, June 3, 2011
By SHP

The Internet bubble is still expanding at an alarming rate. The latest news is that Groupon are planning to list on the stock exchange in an IPO thought to be worth around $750 million.

Groupon have always set their targets high. In 2010 they rejected an offer from Google and turned down $6 billion. Some web analysts felt that this was a very brave move on the part of Groupon as Google continues to work on its range of eCommerce solutions, which include affiliates and coupons products.

Groupon is making good progress in terms of raising revenue. They have been operating some very aggressive advertising campaigns over the last year, often utilising Google’s Adwords platform to reach a wider Internet audience. According to Alexa they spend around $71-120K a month on advertising. It seems that this has really paid dividends as the 2011 first quarter figures show a huge increase in sales.

Groupon started in October 2008 when it offered half price pizza deals in its Chicago office. It has grown massively in the last 2 1/2 years.

So what do Groupon actually do?

The company name Groupon is derived from Group Coupon and is dedicated to providing its customers with the latest discounts and deals. Many businesses offer discount codes to encourage new customers and one common method to market these deal is through affiliates who run their own websites to advertise the latest coupons in return for a revenue share. Groupon are essentially doing this on a massive scale.

Every day Groupon offers one new discount in each market. Its customers buy the money off coupons and deals from Groupon who then keep around half of the face value. So if a company offers a 1/2 price deal through Groupon, Groupon will take half of the purchase price and the company will receive the other half, and the customer gets a half price deal.

They work by operating a mailing list and contact their customers direct when deals come up in the product ranges chosen by their clients.

They operate several websites, with www.groupon.co.uk in the UK and www.groupon.com in America.

Increasing Revenues

Groupon’s monthly revenue increased from $11 million in January 2010 to $89 million in January 2011. Its total estimated revenue for 2011 is in the region of $3.5 billion.

Groupon currently focus on providing discounts to young women, so most deals are in the health and fitness sectors.

Groupon’s Alexa rank is currently 302, meaning Alexa (who rate websites based on popularity) believe that it is the 302nd most popular website in the world.

There seems to be a demand for tech stocks at the moment so the Groupon IPO could be another big one. The LinkedIn IPO saw its share price double in one day, can Groupon do the same? And how long will the tech bubble last for this time?

The rise of tech stocks could mark a recovery of stock markets and the global economy. Then again it could just be that investors are desperate to put their cash somewhere and there are not many other exciting options on the cards at the moment.

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