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Friday, March 18, 2011

Betting on Internet & Social Media...

A bullish social media industry

I tweet, visit Facebook on the go and network through LinkedIn almost every day. I often locate myself through Foursquare. But Groupon? I have never used it and am not planning to use it even though there is so much buzz around this 2 year old company which has given the new definition of "daily deal market". While there has been so much talk on the streets regarding social media companies going public, two of them- LinkedIn and Groupon have announced their potential IPOs in the 2011.

LinkedIn & Groupon both have different business models (please note that Groupon has not been able to explain their exact business model). LinkedIn specifically emphasizes on "professional networking" and the other is focusing on "discounted deals covering food, electronics, tickets, gifts and counting...". Though not accurate, but they have got vast difference in their valuations as well. On the personal front, I have been a big fan of LinkedIn and so I can be bias about my insight on Groupon. But certainly, Groupon's whopping valuation of $25 billions is eye-popping and dubious to me. Because:

  • Daily deal market is pretty crude and fresh for valuation analysts. Immaturity of this industry is one of the impediments behind mighty valuation numbers.
  • A new industry and particularly new company is often valued by venture capitalists and I believe that their perspectives are always overstating.

Here are few things I want to enunciate about Groupon's atypical growth story which is not new to anyone who knows what Groupon is:

  • A year ago from now and a year after its inception, it was valued slightly over $1 billion and now it is valued as $25 billion company. 
  • Hot off the press. They successfully drew around $950 millions last year in funding from venture capitalists.
  • Recessionary environment and looking for discounted deals are positively correlated with each other. And that beautiful correlation helped Groupon to be a bull.
  • It has been hiring employees and adding clients/ merchants all around the globe to its portfolio.
  • Presence in 35 countries with immense competitive presence in China and South Korea, which is the most active daily deal market.
  • Almost doubled their subscriber base in last 3-4 months.

......................... And there is "NO COUPON" for Groupon's IPO price or its valuation!!

1 comment:

  1. social media, such a desirable job to be in lately...