Groupon prices IPO at $13B valuation with travel swagger in the mix

Groupon priced its shares for its IPO debut today at a higher-than-expected $20 per share and at least one analyst urged investors to jump in based in part on the company’s evolving travel business.

Benchmark’s Fred Moran penned a research note urging investors to plunk their money down despite all the criticism that Groupon’s business model may be unsustainable.

And part of Moran’s bullishness about Groupon is based on an expected deeper foothold in the travel industry.



Moran writes:

We expect a combination of more diversification of offerings including travel and product deals to combine with geographic expansion to drive total Groupon gross billings growth of 450% year over year in 2011 to $4.1 billion, leading to $1.6 billion of revenue. Groupon’s dominant position in the rapidly emerging daily deals segment of local commerce could lead to exponential growth and a potentially highly profitable enterprise. We recommend investors participate in the IPO of Groupon.

Moran adds: “These new offerings could really boost growth.”

Groupon priced its IPO Nov. 3 at $20 per share on NASDAQ, higher than the previously expected range, in an offer that could bring a $13 billion valuation for the company. That’s much lower than the buffed up valuation that Groupon and its supporters speculated about several months ago, but it’s meatier than the $11.5 billion discussed over the last few weeks.

Moran writes that “travel and product offering represent the newest avenue for incremental deal offers.”

Groupon enlisted Expedia and its vacation packages and launched Groupon Getaways with Expedia in July. In the interim, Expedia has expressed enthusiasm about the platform and says it will evaluate it further before taking next steps.

Moran also points to another travel industry deals publisher, Travelzoo, for evidence that the daily deals market is picking up some juice.

“Further evidence of daily deals market re-acceleration in September came through Travelzoo’s 3Q11 earnings report released last Thursday with its September billings up 36% over August,” Moran writes. “Daily deals may experience a holiday season uptick if it gets used as a gift-giving tool.”

In June, Groupon indicated in a financial filing that travel is definitely a key component of its growth stategy and that launching deals categories by segment will help it better target customers.

Moran doesn’t detail how Groupon may diversify its travel offerings in the future, but Groupon certainly covets getting more global so the possibilities of bringing in new partners, points of sale and products are many.

That is, of course, is if the business model is sustainable.


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Dennis Schaal

About the Writer :: Dennis Schaal

Dennis Schaal was North American editor for Tnooz.



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  1. Bob

    I am totally lost. Groupon, losing tons of money, relying on a massively margin errosive proposition that suppliers are now becoming wise to, and apparently worth $13B? What on earth is this vaporous company built on?
    Anyone who buys into this IPO is nuts. Remember

  2. DanG

    The question for Groupon isn’t sustainability – it’s whether the model works at all. They are losing money hand over fist – 300 million dollars so far this year. Groupon says this is just customer acquisition costs and once they have you as a customer all they need to do is send (cheap) emails to keep you and sell to you. I’m not so sure that’s true and in any case it doesn’t take into account their non-marketing costs, which are substantial (64 cents of every dollar of revenue). There’s a good summary here:

    In terms of where they could add value in travel, they could make a neat pitch to airlines if they were able to fill planes in off-season periods but offering to fill holiday season flights by discounting won’t endear them to providers.

  3. Dennis Schaal

    Dennis Schaal

    Jonathan: Yes, Expedia is marketing Groupon to Expedia customers, as well. I received an Expedia email two days ago about its 24-hour Expedia ASAP sale, and at the bottom of the email was a banner ad for Groupon Getaways with Expedia, urging users to sign up for it.

    Also, I think there is some differentiation between what Travelzoo and Groupon/LivingSocial are offering in travel.

  4. Jonathan Alford

    Having the Expedia brand to market on the roadshows seems to have helped, though I wonder if Expedia is necessary for Groupon in the medium/longer-term assuming it diversifies its business model away from just daily deals and capitalizes on the “Big Data” of consumer information it’s gathering.

    So far it seems Groupon is distributing the Expedia brand to its huge subscriber base, sharing all the consumer information, and benefiting from Expedia’s hotel supplier base as it launches, but has anyone noticed if Expedia is delivering any differentiated product above and beyond what LivingSocial or TravelZoo is sourcing on their own? Is Expedia marketing Groupon to its customer base in return?


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