Groupon Inc., owner of a daily coupon website with 20 million subscribers, is seeking venture funding that may value the company at about $3 billion, according to three people familiar with the matter.
The company aims to raise the funding to help it expand beyond the 230 markets where it now operates, said the people, who declined to be identified because the fundraising is private. The company had been discussing funding that would value it in the range of $2 billion to $3 billion, two of the people said.
I wonder about this because with the proliferation of location based services getting into the deals game, not the least of which is Facebook, I question what the place in the market will be for Groupon and the kind of deals it offers?
I say these ‘kind of deals’ because these are deals that are pushed out to the consumer based on a rather wide geography. They are often a hit or miss proposition as to whether a deal is on. Many businesses can’t handle the ‘new business’ thus creating a rough customer experience. Many businesses offering a Groupon don’t want to repeat the process with Groupon because of the negative financial impact it created. Lastly, Groupon offers are a great way for a flagging business or one with a bad reputation to generate cash. That last group is the worst one since a deal from a business just looking to generate cash flow rather than offering a great service is no deal at all.
The new direction of ‘deals’ on the spot which are being developed by Facebook, Yelp and every other location based service under the sun (let’s not exclude the Google possibility either) makes the Groupon model suspect to many. It’s the same line of thinking that has created less foursquare buzz as of late once the shine of ‘checking in’ for the sake of ‘checking in’ wore off.
I have used Groupon in the past and have had success but I am also very picky about where I use it. For instance, I am not that interested in trying out a new restaurant based on a Groupon because it smells of desperation on some levels. I realize that this is solely my perception and that’s cool. Interestingly enough though, most restaurants that are doing well don’t need or even want an influx of new Groupon like customers since many Groupon coupon users have a less than stellar attitude toward their ‘bargain’.
So I say make hay while the sun is shining on a valuation that could be in the same vein as those of the first Internet bubble. Those valuations happened because no one really knew what they had so they assumed it was valuable and a few got rich while many were left holding the bubble. The same could be happening as we move into the next era of the Internet world. The trouble is that the rate of change is accelerating thus making it almost easier to overestimate the worth of something while it is coming and going right before our very eyes.
So give us your take on this kind of valuation for Groupon and what its place is in the Internet’s “New Deal” is (pun completely intended).