Groupon rebuffs Google- buy/sell

[Auhasardrobert]

I know Groupon's the scourge of the internet at the moment, but I'm curious what you all think. On the surface it looks like one of the most colossally stupid decisions of all time. But if they really are (or are soon about to be) making 2B top line with a 50% profit margin... why isn't the company worth 6B+?

One of the most obvious criticisms is that there's no barriers to entry. I get it, but a website offering videos could have been easily replicated and YouTube's doing alright. And there's something to be said about a brilliant name with instant recognition - YouTube and maybe now Groupon?

Thoughts?

 

[Kai]

Groupon is nuts.

6 billion dollars????

How do you walk away from 6 billion dollars??

 

[deadly7]

Originally Posted by Kai

Groupon is nuts.

6 billion dollars????

How do you walk away from 6 billion dollars??

You love what you do beyond a monetary sum?

That and you wait for Google to up their offer. Google needs Groupon; Groupon does not need Google.

 

[v.freeman]

Dumb move by Groupon, almost as bad as the move by Jerry Yang. Purchase price was 10x revenues, way too inflated.

 

[Auhasardrobert]

Forget for a minute the magnitude of the number, does Groupon's rationale make sense?

2B topline with 50% pass-through (after paying out the retailers), effectively leaving 1B in revenue.

Next assumption is that they really do have a 50% profit margin. Is this realistic? Sustainable? By all accounts their overhead is tiny. If so... 500M earning at 12x = 6B. Now consider the massive press they're getting, a great growth story and a business model which seems to make sense... what does it all mean!?

Finance heads (gdl, metro, whacked, etc.) - chime in!

 

[suzuka]

if google's willing to pay that much, the venture capital firms will be equally willing to finance Groupon until it's valuation is in their home run phase.