Crush Brands

Strange timing for the social network giant that prides itself on discounts.  With its recent announcement of public offering, the question remains; will you be getting a discounted stock price?

This seems to be contingent on whether or not the purchaser believes that the price will continue to rise when so many others are replicating the model.  In this day in age, the original isn’t necessarily the most successful.  We see that Groupon is getting killed by similar services such as LivingSocial.com, Local.com, and many others who are replicating the “deal finding” model.

One should always stand weary of something that grows so fast, all the while realizing that there must be a ceiling on the success of a particular service such as Groupon in an industry that is becoming saturated daily with upstarts of similar genre.  While Groupon continues to rely on its catalysts, I.E. Forbes conclusion that Groupon is the fastest growing company ever, the tangible revenue numbers cannot continue to be denied.

Something that is in perpetual motion can only be stops if acted upon by an outside force and it seems as though profit might be that outside force.  We question whether or not Groupon has ever made money despite its reporting in the first quarter of 2010.  The new model of online based companies and social networks derives value of the company far exceeding their profits.  However, how far does that model get you unless you are among the Facebooks and Twitters of the world? 

Groupon continues to give explanations for their losses yet are certainly not hiding them.  They claim that marketing expense, which is extraordinary for Groupon in particular, is factored in prior to reporting quarterly numbers which is essentially the .com model.  They expect to raise $750 million in options upon their offering.  There needs to be a point when they cut back with their advertising/marketing dollars and figure another, less costly method of attracting unique users.  It seems the only logical answer to the question is the use of alternative social media platforms that are essentially considered competitors!

It has become excessively questionable as something that might be “To Good To Be True.”  As a somewhat educated onlooker, I always question the future of something that continues to exceed expectations.  Soon enough, expectations continue to rise and all it takes is one mistake to ruin the reputation quality.  Word of mouth must continue to be Groupon’s sole catalyst all the while maintaining the rapport that it has with its current and future users and shareholders.

My personal opinion from someone who moderately plays the market is to buy quickly and sell quickly within 2-3 quarters.  By no means is there is any way to predict where the company will be in a year or two years because of the unprecedented success it’s experienced.  The powers that be at Groupon are obviously much smarter than me, but questionable moves, such as the rejection of a $6 billion offer from Google, raise red flags about pride and ego among executive leadership.  Google’s plans are set to launch a similar model to rival Groupon, and they are certainly not a company with which ANYONE (with exception to Facebook in terms of future company acquisitions) wants to compete.  For a company who thrives on discount, they certainly are spending out of their means, thus, are looking to lean on future share holders.  Do you want to be that guy?

-R. Hendrix