Groupon Valuation

Groupon's Valuation Appears to be a Scam.

Why can't real investors get excited over a food coupon internet site? There are many reasons, and I will list why this company is not only fraudulent in its offerings, but a terrible investment for investors who think the IPO will be valued at 15 billion.

First off, everyone is tired of seeing these dumb Google adsense ads of hamburgers and 90% discount offerings, not only because nobody wants these products, but the offer is not really genuine.

These spam ads fill pages of internet sites, and create an eye-sore for lowlly, starving, internet developers who have Adsense enabled on their site(s). .  Internet surfers world-wide are also sick of seeing pictures of hamburgers and muffins when they are trying to search for stuff or read articles on the web.

Not only is Groupon gouging and hurting small business owners by raking in 50% of the profits from these offerings, but they are also hurting customers. Groupon coupons are also often times reported as being irredemable at times, and because of the small size of the offerings, the "90% off" claims are also misleading and borderline false advertising.

The proliferation of daily-deal sites such as Groupon, LivingSocial and Eversave have helped consumers get up to half off at participating eateries, but some owners view them as the new scourge of the industry.

“They are deflationary weapons of mass destruction and are very, very dangerous for the restaurant industry to get involved in,” said Jeff Gates of Aquitaine Group. “I don’t think restaurants realize how challenging the bottom line is without giving half off to your customers. (They) lose track of what they’re giving away.”

Look at the horrible registration and login form on the site (when you try to register).  Does a multi-billion dollar company have a registration form that constantly produces errors? I don't think so. They cannot even build a functional registration form for their users to submit. There are many Captcha errors, as well as the state resetting upon missed input when pressing 'enter' on the submit form. I couldn't even believe it when I had to enter data into the registration form about 5-6 times, before the 'submit' would 'take.'

As Groupon anticipates a $15 billion IPO most likely, investment bankers fight to cash out of this over-valued asset.  At a valuation of $240.00 dollars PER SUBSCRIBER (yes, that means just an email address, not a fully paying subscriber), nobody can even make a fair case for its current 'valuation.'  That number is so shocking, it doesn't even need an explaination. Since we do not even know Groupon's true revenue numbers, since it is a private company, we can put a safe estimate at $700 million, lets say.  What is the cost of revenue?

Even at a generous revenue of $700 million per year, at 15 billion dollars, this puts a PRICE to SALES ratio of 21 on this company.

The problem with Groupon's massive group discount gimmick is that is designed to build loyalty and market share for Groupon, not the small businesses it relies on.

Failures overseas.

Remember, the United States is only 5% of the world population.  Not only is this gimmick offensive to small business owners, but it results in decreased value added to the customer.

Yikes!  Groupon in Japan ---- Fail

But in step with the more hectic, Internet era that doesn't allow for as much time to craft the meal from scratch, osechi meals across Japan are being increasingly replaced with ready-made sets in supermarket and convenience stores. And now a growing number of people even prefer to get their first meal of the year home-delivered with a click of the mouse. But leaving the fate of osechi meals to the whims of the Internet became a recipe for disaster this year: some meals arrived in disastrous form, a company president was forced to resign over bad osechi, and orders were received after Jan. 1.

"Troubles with osechi" has been the theme hitting giant e-commerce sites Groupon and Rakuten this year, prompting some to question whether they should entrust such a valuable tradition to online marketplaces in the future.

Why?

Americans Becoming Disillusioned with Groupon, as a company and as a 'concept'

Don't take our word for it; let's see what some customers had to say about the product/service:

1)      Spam email by a new name! Loads of junk virtually nothing remotely useful, relevant, or nearby. Contacted groupon to ask if there was a way to personalize to reduce volume, got a snippy response saying that if I didn't like the way they do it I could leave. So I did. Spam email by a new name! Loads of junk virtually nothing remotely useful, relevant, or nearby. Contacted groupon to ask if there was a way to personalize to reduce volume, got a snippy response saying that if I didn't like the way they do it I could leave. So I did. « less

2)      Why do you hate Groupon? they help businesses fail rather than succeed - they should give the businesses a better value -- something that will help their business prosper - not Groupons wallets get fatter and fatter until their bubble pops - in my humble opinion.

Joe Somerville CEO Founder www.DiningPerks.com

3)   Groupon will not allow deals from companies that are competitors of existing businesses. It's their right but just know there could be better deals out there if they didn't play this game. Thought they were for the consumer getting the best deals. Guess not.

4)   Groupon advertising is a scam. They make offers on deals that don't exist. Forty-nine dollars later I found that out. They are a scam!

5)   "I find that the merchants are not happy to see a Groupon coupon when presented. It's the same old coupon discount paradigm, with a different name. Also, the short term bookings with the merchant become so overloaded that scheduling a time to execute the Groupon is exceedingly difficult. I have even found merchants who limit the number of Groupons that they will accommodate at any given time - which raises issues about executing it before the expiration.  From now on, I will spend the extra money and leave with my pride."

6)      "Groupon is a SCAM. Out to hurt small business as they take a HUGE cut of the $ for themselves while businesses are hurting, cheap greddy way of doing business. A way of robbing business of their livelihood, it's not right. Businesses do not like to treat Groupon coupon the same way as purchasers are perceived as cheap deal. GROUPON SHOULD BE SHUT DOWN FOR GOOD, find another way of making a living in an honest way. Thank You! "

7)    Groupon hurts both the businesses and the customers who buy the coupons..... for ALL the reasons that people mention in the emails below. They made a mistake in the promotion associated with my business and they did not try to fix the error, or make amends in anyway, OR even apologize for their mistake that resulted in my customers being angry wit"Groupon hurts both the businesses and the customers who buy the coupons..... For ALL the reasons that people mention in the emails below. They made a mistake in the promotion associated with my business and they did not try to fix the error, or make amends in anyway, OR even apologize for their mistake that resulted in my customers being angry with my business... it was the most frustrating experience of my fourteen years of being in business. And, it is TRUE, Groupon customers want something for nothing and they are the most difficult customers I have ever had to deal with so between the bureaucratic headaches of having to deal with the people (and the sleazy salesmen) at Groupon, I then had to take a lot of crap from the unhappy Groupon buyers.... OMG!! What a nightmare. Groupon should be shut down!!! Thank You!

8)      "I got a website about travel and transport. Before, people got relevant ads about all kind of stuff around this. I could even customize the field for Google-ads to fit my theme -> perfect!!
Now, there is just one add showing!!! It's always the same (for months now!)... For burgers! Doesn't fit in AT ALL! From being a super adform, Google has become an annoying piece of standard junk-ad that only bothers my customers. Sadly to say, I'm not connected to Google-ads anymore now...!"

From what we can tell, Groupon is somehow connected with Google Adwords. Whether laws have been broken, only time will tell.  Nobody really knows the depth of this, but it appears that Larry Page did not approve of the Google Offer to purchase this over-inflated asset.

LINKS:

http://amplicate.com/hate/groupon

http://blogs.wsj.com/japanrealtime/2011/01/05/after-mochi-osechi-the-first-food-brouhaha-of-the-new-year/