4 ms·

I just don't understand why anyone would invest in a hot IPO for a company that hasn't even turned a profit yet and had a $389.6 million net loss in 2010! Can

I just don't understand why anyone would invest in a hot IPO for a company that hasn't even turned a profit yet and had a $389.6 million net loss in 2010! Can someone explain to me the allure of an investment like this?

svrocks 15y ago
because there are far more people who don't care about such trivialities as profitability or sustainability than those who do
DLarsen 15y ago
It's alluring as a trader; less so as an investor. An IPO like this is going to have plenty of trade-able price movement.
- jdp23 15y ago
  It's also very alluring to the the current investors and founders.
staunch 15y ago
They appear to have cracked the nut on local advertising. Their business could end up bigger than Google's.
- jonknee 15y ago
  Losing a lot of money by emailing half-off coupons isn't going to end up bigger than Google.
  - staunch 15y ago
    Google drives billions in revenue to online businesses. Groupon drives billions in revenue to local businesses. There are important differences, and Groupon may fail, but their fundamental market opportunity is easily as big as Google's.
    - jonknee 15y ago
      Google also drives billions in revenue to local businesses. I spend more locally through Google and even Yelp than Groupon. Humorously, to drive growth Groupon has been sending bucket loads of cash to Google.
    - deleted 15y ago
      [deleted]
- svrocks 15y ago
  Wow. Google revolutionized the way we entertain ourselves, learn information, and interact with each other. Groupon has revolutionized paying $5 less for a pedicure on Sundays before 1pm.
  - Helianthus 15y ago
    You have stated the point sarcastically but thereby revealed the truth of the point you're responding to.
  - staunch 15y ago
    Groupon is revolutionizing the way we explore our local communities, discover hidden treasures, meet like-minded people, go on adventures we wouldn't have otherwise. Google has revolutionized finding celebrity sex tapes and forwarding people to Wikipedia 2 billion times a day. (It's easy to put a spin on anything)
    - Illgetthere 15y ago
      Imagine life without Google (or any other search engine) Can you? Now imagine life without Groupon. Done.
    - Illgetthere 15y ago
      Groupon isn't revolutionizing anything, it's DISCOUNTING the way we explore, discover, meet...
  - nostrademons 15y ago
    Google monetizes very little of what they revolutionize. As far as money goes, Google revolutionized how we find small businesses. That's pretty much it. The entertainment, education, and interaction portions are all loss leaders so that the answer to "How do you find small businesses?" is "I go to Google." Groupon does the exact same thing, answer "How do you find small businesses?" The difference is that they compete on price instead of relevancy. Google's value proposition is that they will show you the most relevant ads to your query, so that you don't need to wade through lots of useless shops to get the one you want. Groupon's value proposition is price: the merchants they show you will give you lower prices than the ones you'd find elsewhere. It remains to be seen whether this is a sustainable value proposition. I can think of two Web 1.0 companies that Groupon reminds me of: Amazon.com and Kozmo.com. But while Amazon became a huge retailing powerhouse, Kozmo deadpooled, hard. The difference was that Amazon's value proposition was convenience and selection, and they used the Internet to deliver both through some pretty impressive logistics management. Kozmo's value proposition was convenience and price, and they used lots of venture capital money to deliver both through selling at a loss. Groupon's business seems to remind me a bit more of Kozmo's though: they compete on price through using direct subsidies.
- deleted 15y ago
  [deleted]
geeksam 15y ago
http://en.wikipedia.org/wiki/Greater_fool_theory http://en.wikipedia.org/wiki/Greater_fool_theory
philwelch 15y ago
If a growing company is too big for VC's to handle, it has to IPO to continue gathering investment. Especially if it's capital-intensive. Amazon did this in 1997 and that doesn't seem to have been a disaster.

svrocks 15y ago

because there are far more people who don't care about such trivialities as profitability or sustainability than those who do

DLarsen 15y ago

It's alluring as a trader; less so as an investor. An IPO like this is going to have plenty of trade-able price movement.

jdp23 15y ago
It's also very alluring to the the current investors and founders.

staunch 15y ago

They appear to have cracked the nut on local advertising. Their business could end up bigger than Google's.

jonknee 15y ago
Losing a lot of money by emailing half-off coupons isn't going to end up bigger than Google.
- staunch 15y ago
  Google drives billions in revenue to online businesses. Groupon drives billions in revenue to local businesses. There are important differences, and Groupon may fail, but their fundamental market opportunity is easily as big as Google's.
  - jonknee 15y ago
    Google also drives billions in revenue to local businesses. I spend more locally through Google and even Yelp than Groupon. Humorously, to drive growth Groupon has been sending bucket loads of cash to Google.
  - deleted 15y ago
    [deleted]
svrocks 15y ago
Wow. Google revolutionized the way we entertain ourselves, learn information, and interact with each other. Groupon has revolutionized paying $5 less for a pedicure on Sundays before 1pm.
- Helianthus 15y ago
  You have stated the point sarcastically but thereby revealed the truth of the point you're responding to.
- staunch 15y ago
  Groupon is revolutionizing the way we explore our local communities, discover hidden treasures, meet like-minded people, go on adventures we wouldn't have otherwise. Google has revolutionized finding celebrity sex tapes and forwarding people to Wikipedia 2 billion times a day. (It's easy to put a spin on anything)
  - Illgetthere 15y ago
    Imagine life without Google (or any other search engine) Can you? Now imagine life without Groupon. Done.
  - Illgetthere 15y ago
    Groupon isn't revolutionizing anything, it's DISCOUNTING the way we explore, discover, meet...
- nostrademons 15y ago
  Google monetizes very little of what they revolutionize. As far as money goes, Google revolutionized how we find small businesses. That's pretty much it. The entertainment, education, and interaction portions are all loss leaders so that the answer to "How do you find small businesses?" is "I go to Google." Groupon does the exact same thing, answer "How do you find small businesses?" The difference is that they compete on price instead of relevancy. Google's value proposition is that they will show you the most relevant ads to your query, so that you don't need to wade through lots of useless shops to get the one you want. Groupon's value proposition is price: the merchants they show you will give you lower prices than the ones you'd find elsewhere. It remains to be seen whether this is a sustainable value proposition. I can think of two Web 1.0 companies that Groupon reminds me of: Amazon.com and Kozmo.com. But while Amazon became a huge retailing powerhouse, Kozmo deadpooled, hard. The difference was that Amazon's value proposition was convenience and selection, and they used the Internet to deliver both through some pretty impressive logistics management. Kozmo's value proposition was convenience and price, and they used lots of venture capital money to deliver both through selling at a loss. Groupon's business seems to remind me a bit more of Kozmo's though: they compete on price through using direct subsidies.
deleted 15y ago
[deleted]

geeksam 15y ago

http://en.wikipedia.org/wiki/Greater_fool_theory http://en.wikipedia.org/wiki/Greater_fool_theory

philwelch 15y ago

If a growing company is too big for VC's to handle, it has to IPO to continue gathering investment. Especially if it's capital-intensive. Amazon did this in 1997 and that doesn't seem to have been a disaster.