

Groupon Said to Seek New Round of Funding That May Value It at $3 Billion - atularora
http://www.bloomberg.com/news/2010-11-08/groupon-said-to-seek-venture-funding-that-may-value-company-at-3-billion.html

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trotsky
$3B is an outlandish valuation, especially considering they were valued at
less than half that ($1.3B) in a round a mere 6 months ago. Sure the 50%
revenue split makes it look like a cash cow on paper, but that kind of
division seems unsustainable given how few merchants are willing to repeat
groupon promotions or report that they were profitable endeavors.

If groupon really does take cash in at that kind of pre-money level it will
really only mean that interest rates are so low and available investment money
is so high that we're officially in another bubble.

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falsestprophet

      $3B is an outlandish valuation
    

What leads so many people to imagine they can identify _outlandish_ mistakes
in a company's valuation without any knowledge of the company's financials?

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michaelchisari
Given the history of economic valuation in this industry, I think being
critical is more than justified.

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noneedtosay
You think Facebook is overvalued, with no understanding of its financials or
strategy.

You think Groupon is overvalued, with no understanding of its financials or
strategy.

Do tell, is there anything out there you find _undervalued_ , without an
understanding of its financials or strategy?

It's so easy to be a cynic and appear brilliant.

~~~
michaelchisari
I'd be interested to hear your thoughts on why Facebook is not overvalued,
since you have as much of an understanding of it's financials and strategy as
I do (assuming you don't have internal information, of course).

Facebook has stated that it's profits are in the "tens of millions" annually.
Assuming, for ease of math, that translates to around $33 million a year, that
puts their P/E at around 1000.

Their strategy seems to be a combination of ad space sales, and the sales of
Facebook credits, although they've stated that the majority of their revenue
comes from advertising. I'm very skeptical that advertising is the kind of
business model that can meet that level of speculation.

Do you feel this is an incorrect set of conclusions, given the information
culled from Facebook's representatives? Or do you feel that I've overlooked
information about it's strategy or revenues? If you have information that
conflicts, or adds to this, I'd be very interested, as I'm sure many people
here would be.

~~~
flipbrad
oh but michael, you're forgetting: facebook has all those eyeballs!

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trotsky
[http://blogs.wsj.com/digits/2010/09/30/rice-university-
study...](http://blogs.wsj.com/digits/2010/09/30/rice-university-study-
groupon-renewal-rate-not-so-hot/)

quoting:

"The Rice study found that 66% of the 150 merchants responding found the
program profitable, while 32% said they were unprofitable. Forty percent of
the respondents said they would not run such a promotion again."

and

"The owner criticized Groupon for not putting limits on the number of coupons
it sells and taking too high a percentage of those sales. “There came a time
when we literally could not make payroll because at that point in time we had
lost nearly $8,000 with our Groupon campaign,” the owner wrote. “We literally
had to take $8,000 out of our personal savings to cover payroll and rent that
month. It was sickening, especially after our sales had been rising.”

