Rumored numbers were off

I, like many other people writing about internet companies, have been guilty of spreading the rumor that Groupon 2010 revenue were nearing $2 billion. The reality is much starker as the company has generated revenues of $713 million for that year with net losses of over 456 million for that year.

According the S1, they also had 50.6 million users at the end of 2010, which was higher than the 30 million that had been widely reported. So if I were to revise the chart I had created in late 2010 based on the rumored numbers, it would look like this:

My first reaction, when looking at this is that we are dealing with a company with massive losses here and that’s a first red flag. Many have compared those losses to Amazon, a company that went public even though it had big losses so I decided to go all the way back to 1997 and pick up the Amazon S1 to see how it compared.

GroupOn vs. Amazon

Based on those numbers, the first thing that seems out of whack to me is the level of risk one is asked to take based on the potential revenue per user. Maybe a $200-$500 million valuation would make more sense for GroupOn at this stage, if we truly want to compare it to Amazon back then.

The other thing is that the valuation per user seems extremely high. In a world where Amazon gets $189 per user, we are led to believe that Groupon could do more than twice that number, making it almost as successful as Apple in terms of monetizing users. Color me cynical but I have serious doubt that’s achievable on the current business model.

GroupOn vs. LinkedIn

A couple of weeks ago, I ran comparisons between LinkedIn IPO and a few other tech companies that went public. Let’s superimpose the groupon numbers and the LinkedIn numbers to see how different those offerings are:

The other big thing is that revenues per users are actually on the low side compared to other technology companies. For example, Groupon makes less revenue than Ebay ($39) or Google ($24), two companies that have demonstrated long-running businesses. Furthermore, the company’s losses are staggering, even for a company in growth mode.

Bubble numbers

I’ve long warned people about tossing the bubble number around. In fact, I was probably one of the biggest debunker of bubble thinking but, if a company like GroupOn is allowed to go out at the valuation it has set forth, I am afraid that we will be making the same mistakes we have made over a decade ago. I am sorry to disappoint GroupOn shareholders but, in this case, I believe that to let such a company go public would be to endanger the whole startup ecosystem that has been flourishing over the past years.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title The bubble is (group)on. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

So yes, Google is paying $1.65 billion for youtube, Ebay spent $2.6 billion on Skype (making the Google/YouTube deal look like a cheap deal), and News Corp. paid $580 million for MySpace (making them look frugal compared to the other two big deals) but the truth is that, across 20 major deals, those 3 stand out as the exception and not the rule. It appears that, on average, deals are generally below $50 million and, in most cases, lower than $10 million.

Bubble 2.0?

I’m sure people are going to call me out on this because I’ve previously warned about the possibility of a new bubble being created. However, at the current time, it seems the data does not support that conclusion yet.

What it appears to support, however, is an interesting calendar anomaly: it appears that major deals generally happen in the 4th quarter of the years (either that, or I got my data set wrong)

Another interesting point is that I haven’t found any other chart of that type around the net. So I figured this page can be a starting point. Hopefully, faithful readers will help me fill this chart with more data points so we can do more granular analysis

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title No Bubble 2.0 yet. You can follow him on twitter here or receive his weekly newsletter by subscribing here.