Groupon Turns Down Google: Could It Launch a New Wave of Internet IPOs?
Groupon has rejected Google's (GOOG) buyout offer of roughly $6 billion, anonymous sources told Chicago Breaking News and TechCrunch on Thursday. Dow Jones's All Things D sources put Groupon's revenue run rate at $2 billion, four times higher than the $500 million run rate of nearest rival LivingSocial, which just bagged a $175 million investment from Amazon (AMZN).
Is Groupon saying no because it is asking for more money? Possibly. But its highly likely that Groupon is gunning for a blockbuster Internet company IPO, a nearly extinct beast last seen in Silicon Valley...well, you know when. Much is being made of a new Dot-Com frenzy centered on mobile and social apps. Super VC Fred Wilson of Union Square Ventures, who got in early on Twitter and Foursquare, among others, says he's been seeing more "unnatural acts" -- high valuations and less due diligence -- by his fellow investors. Yikes!
New Era of Web IPOs?
If Groupon is indeed aiming for an IPO, it would join a number of big Internet companies queued up in the IPO wings. Are we about to enter a new era of big IPOs for Web companies? Consider this formidable troika of Internet giants: Facebook ($50 billion valuation), LinkedIn ($1 billion valuation, at minimum), and Zynga ($4 billion valuation). Not to mention Twitter and Foursquare, which we'll leave out because they don't have revenues ready for an IPO, making it difficult to assess their potential value.
The Big Three -- Facebook, LinkedIn and Zynga -- all have revenues that are approaching, or well over, $1 billion. All are solidly profitable and have very large, growing revenue bases. All are benefiting from the ongoing adoption of social media tools and, more importantly, the growing willingness of businesses to advertise on those tools to build their brands or, in the case of LinkedIn, recruit employees. All continue to grow very handily, despite their size.
In other words, these are not Petstore.com or Webvan IPOs. These are solid businesses. And, in some ways, Groupon is still the likely lead candidate of the bunch. Why? Its almost stupidly simple and insanely lucrative business model of collecting checks up front en masse has fueled speculation of high potential profit margins. After all, what are their real costs? People, advertising and some technology.
Whatever the case, its pretty easy to envision Groupon scoring an IPO of well over $10 billion, particularly considering that it's probably more profitable than Facebook. And once Groupon goes public, you can expect a thundering herd to follow in short succession before the IPO window can slam shut.
Get info on stocks mentioned in this article:
