Groupon has fallen hard since it was the “fastest-growing company in the world” with a valuation of $25 billion, thanks to revelations of accounting discrepancies, revenue numbers, payouts to early investors and a class action lawsuit by employees. Groupon already looks overvalued at its current $10 billion valuation, says Henry Blodget, who estimates a more appropriate valuation would be in the $7.5 billion range in a post titled, “I Wouldn’t Touch Groupon’s Stock At The IPO Price With A 50-Foot Pole.”
Bummerzone for Andrew Mason. But there may be some Groupon backlash backlash. “But just for the sake of symmetry, here’s a simple bull case for Groupon, and for how it could get its really high revenue growth back,” writes the highly-regarded Reuters finance blogger Felix Salmon this morning.
Now that Groupon has a massive subscriber list, he writes, the company can stop trying to sign up new customers and move on to more creative models of monetization: impulse buys, high-priced goods, travel deals. “Groupon could easily become as valuable as, say, Priceline, which has a market capitalization of $24 billion,” Mr. Salmon writes. “If you look at the size of the customer base, and the loyalty of those customers, it’s hard to make a case that a mature Priceline is five times more valuable than a mature Groupon. After all, Priceline is much more constrained in what it sells than Groupon is, and it reaches fewer people.”
Interesting that Mr. Salmon compares Groupon to Priceline, which was flying high with a valuation about equal to that of the entire airline industry, opened on the NASDAQ at $16 and closed at $69 despite losing money every quarter except one. But when the market crashed and burned in 2001, Priceline was nearly delisted.
We weren’t just scaling back, slowing down, or doing more layoffs. The site was to be shut down that night. The next morning Jay Walker, founder of Priceline.com, gave an emotional talk to a rather shocked staff and tried to convey that we hadn’t failed. He stressed that we had a real business with real customers, but had simply run out of money,” says Guise, who was one of the first of five Wharton alums to start at WebHouse Club, a separate company and privately-held licensee of Priceline.com. “What was devastating was that I felt like we were just about to turn the corner of success.” [employee account in Wharton Magazine]
Luckily the company pivoted, hired a new CEO and executed a 6:1 reverse stock split, recovering in less than two years. More struggles followed–its Better Business Bureau delisting mirrors Groupon’s public relations problems with unhappy merchants and overworked employees. It’s odd how parallel the two companies’ stories are. But now we know what Groupon has to do to break out of its slump: kill that annoying cat and hire William Shatner.