Comments on: Groupon is not a tech company. Why was it valued like one?

By: Kamath

Kamath — Fri, 31 Aug 2012 00:04:45 +0000

Hey Om,

What about Secondmarket? Why are smart investor valuing a boiler room greasy broker with website front end like a technology company. Also how about writing about the poor individual investors that got fleeced buying Facebook and Groupon.

Good points but you need to bolder. It’s OK to say the smart guys–like Kleiner Perkins–are wrong before the shit hits the fan. :) Great column.

By: Julius J

Julius J — Fri, 24 Aug 2012 11:06:52 +0000

Groupon,
I payed for an offer in March 2012 and still wait for the offer of dentale WhiteLight to arrive.
more like con-pon
for reference 382/1461
jjamv

By: Om Malik

Om Malik — Thu, 23 Aug 2012 19:06:54 +0000

Thanks for your comment Paula. Good of you to remind us of the older names/

By: Sumeet

Sumeet — Thu, 23 Aug 2012 16:29:47 +0000

i wonder if there really is a technology company other than ones that make software or hardware. Microsoft’s, CISCO’s and Oracle’s can be technology companies. However Google’s, AOL’s (first an ISP and now a content co.), Yahoo’s, Facebook’s, Zynga’s, Groupon’s and salesforce.com’s are really businesses/ business models that took the offline model online and used “TECHNOLOGY” as an enabler.

By: Mark Johnson

Mark Johnson — Thu, 23 Aug 2012 14:11:18 +0000

This is a superficial story that makes me think you don\’t understand who Groupon is. Is this what passes for journalism these days? Maybe try talking to some people who know Groupon? Maybe try doing some investigation?

By: Paula Rosenblum

Paula Rosenblum — Thu, 23 Aug 2012 11:26:34 +0000

Nice article. Of course Groupon’s not a technology company. Neither were about 90% of the old internet-bubble companies. They were retailers with a technology front end (instead of a terrestrial one). Only a few survived, for reasons we now understand. Yet at the time, investors chose to ignore basic business logic – you’re supposed to make a profit, and marketing costs back then were just way too high for most pure-plays, while barriers to entry were way too low.

So it is with Groupon. Those of us who follow retail knew from the beginning this one was a pig in a poke. Same story – zero barriers to entry (technology to send emails and manage lists is pretty common now), high marketing costs (or maybe just cost of sales), hard to differentiate – at the end of the day, Fab and Gilte Group have found way better niches – there just was no there there.

By: YY

YY — Thu, 23 Aug 2012 04:59:30 +0000

The physical infrastructures takes time and cost more in the initial investment stage, this reduces their costs at later operational stages. The web makes expansion faster and requires less infrastructure investments. However, they require higher bandwidth and marketing expenditure. In place of the money placed into the infrastructure investment, investors place their money into the pockets of founders, financial investors etc…

Having said that, physical infrastructure can also be a limitation as the reach is physically limited to a certain area. Walmart is still struggling with its Asian expansion whereas the likes of Zangya, Facebook, Groupon etc… already have strong international reach.

By: Sean Cassidy

Sean Cassidy — Wed, 22 Aug 2012 21:08:54 +0000

What about Joyus ?

By: Deepak

Deepak — Wed, 22 Aug 2012 11:45:09 +0000

A very nice article indeed Om. I think, you are absolutely right on Groupon being wrongly valued as a technology venture. The reason for that is that it is very very difficult to scale. Groupon Sales staff needs to keep on identifying new deals every single day for the business to sustain. So, it is not non-linear in terms of the revenue growth. The revenue growth will grow with the number of deals on offer rather than the number of customers (which can, however, grow in a non-linear manner).

A true technology venture is a company like Facebook where the revenue growth is non-linear (not proportional to growth in number of people).

By: Alok

Alok — Wed, 22 Aug 2012 08:39:25 +0000

Duds they are .. the PE analysts… with no or meager experiences of real world…. read mcKinsey report on etailing and your eyes will be open… the eCommerce business model is not sustainable as a stand alone business… can never replace or compete with brick and mortar in the long run…