Group-buying giant Groupon has taken aim at its competitors, claiming it will be tough for them to penetrate its market share, as it prepares for its initial public offering.
Groupon filed its S-1 registration documents with the Securities and Exchange Commission in June, saying it intended to raise $750 million.
Get daily business news.
The latest stories, funding information, and expert advice. Free to sign up.
According to the company’s filing, Groupon has more than 83 million subscribers – although only 15 million have bought a coupon – and there have been 70 million coupons sold.
While there is no share price listed in the filing, reports suggest the company is aiming for a valuation of between $US20-25 billion.
However, it’s been suggested the regulatory review process may take longer than usual for Groupon due to “nonstandard financial measures” used by the company.
Groupon co-founder and chief executive Andrew Mason is now defending claims the company is facing financial woes, sending a lengthy email to Groupon’s employees.
“While we’ve bitten our tongues and allowed insane accusations to go unchallenged publicly, it’s important to me that you have the context necessary to brush this stuff off,” Mason wrote.
“We are generating cash, not losing it. We generated $25 million in cash [in the] last quarter alone, adding to the $200 million we had before.”
“In other words, we’re doing the opposite of running out of money.”
Mason goes on to discuss four key points outlining his confidence about the company’s growth, including references to some of its competitors, namely Living Social and Yelp.
“My point is not that our competitors will fail – some may actually develop sustainable businesses or even grow,” Mason wrote in the email.
“The real point is that our business is a lot harder to build than people realise, and our scale creates competitive advantages that even the largest technology companies are having trouble penetrating.”
But Telsyte senior research manager Sam Yip has continued to raise doubts over the profitability and sustainability of group buying sites.
“The big question is, how profitable is it to run a [group buying] site after running out merchant margins and all the other costs, such as the high cost to acquire customers? This is a grey area that needs to be spelt out,” he says.
Yip says as the market becomes more crowded, more general group buying businesses will either merge or fold, as seen by local player Cudo, which recently went on sale.
Yip says sites need to ensure their niche remains clearly defined or risk falling over.
“We’re still in the early days of group buying [in Australia]… But I see opportunities in travel and accommodation, leisure and recreation,” he says.