The future of Groupon

Well, the honeymoon was good while it lasted. Groupon’s reign at the top of the Local Offers pile will soon be challenged by a slew of well- funded and aggressive big boys ranging from Facebook (Facebook Deals) to Google (Google Offers). Other smaller competitors like LivingSocial are also clicking on their heels with aggressive promotion and unique approaches (LivingSocial Families) to the problem.

Given all this fuss, attention and competition over local offers and customized deals, can a highly niche Groupon survive?. More interestingly, should they have sold out to Google when they had a chance at their sky-high valuation?

It is worthwhile examining the future of Groupon as the the King of local offers for two reasons- the proposed $1 billion IPO valuing the company at $20 billion and the future of a fledgling business that is atleast temporarily disruptive.

Point: Why Groupon is here to stay?

Groupon has significant name recognition in the segment of local deals. Coupons are alternatively being refered to as Groupons, even when offered by competitors. This is the kind of zeitgeist that Google has enjoyed with its search. It will be hard for anyone to compete with that name recognition.

Groupon enjoys good to acceptable relationships with most merchants in towns and cities that it operates. This will help them go back for future offers- something that will be a challenge for other new entrants.

Local coupons could be the future of shopping and if so, Groupon stands as the first to have capitalized and even started the trend. It will be an icon in a business model it helped refine and grow. Hard to beat such an incumbent.

Counter Point:Why Groupon will soon be an also-ran?

Google, Amazon and Facebook have all thrown in the gauntlet in an already crowded business. It will be a difficult ask given how widespread the clout of Google, Amazon and Facebook is and how deep their pockets are. Google Offers is reportedly making the pot much sweeter for merchants. Such competition is new and difficult for Groupon that has enjoyed an almost unquestionable leadership at the top. Can an independent, albeit first mover company stay competitive and on top?.

The Groupon valuation raises several eye-brows and it is not entirely unwarranted. For a company that is not really making much money as profit and one whose executives have shown that they want to fill in their pockets before investing money in the organization, it is definitely a big valuation. It is not far off from how much the other big tech IPO has generated this year but is still a lot.

Are merchants losing a lot more money than they think with Groupon?. This question has found quite a few supporters. In addition, are buyers, customers of Groupon or the merchant offering the discount?

Finally, there are questions on how sustainable the coupon business is. Once the initial euphoria is over, would merchants want to participate in second and third round deals?.