In a development that’s sure to add further froth to the “is this a tech bubble” debate, e-couponing business Groupon has filed for an IPO, setting out to raise as much as $750 million in an offering which could value the company as a whole at $20 billion or more.
Groupon’s growth to this point has been remarkable. In 2009, it had revenues of $30.47 million; in 2010, it had revenues of $713.4 million; and in the first quarter of 2011, it has already had revenues of $644.7 million, almost as much as it made over the course of all of last year. As of 1Q 2011, Groupon has 56,781 merchants, as compared to 212 in 2Q 2009.
Yet the company has yet to make a profit. Spend a billion dollars to buy $700 million and your revenues may look impressive, but your profits, well, not so much at all; in fact, Groupon essentially did this and then some in 2010, showing losses of $389.6 million. In the first quarter of this year, it has lost $102.7 million.
Groupon’s true believers are counting on the company’s extremely aggressive sales and marketing bearing more fruit than they eat up in the future, and if it succeeds in its ambition of becoming the go-to e-commerce site for consumers who are hungry or bored, then it will have quite a Buffettesque moat. But as Michael Arrington recently pointed out, the 2000 bubble and subsequent burst were typified by “Everything [being] valued at a multiple of revenue. It didn’t really matter how unprofitable you were.” On the flip side, it took Amazon.com years to turn its first profit, and it’s a pillar of the industry now. It’s too early to say which path Groupon will follow, but this time around, a lot of people will certainly be monitoring its progress.
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