Henry Blodget has a smart post on how to value Groupon today. Is he right that it’s vastly overpriced at a $10 billion valuation?
Yes. Emphatically, absolutely, yes. Groupon’s slowed growth isn’t the reason it isn’t worth what it is valued at. It is because Groupon’s model is broken. Other’s have talked about how Groupon’s "Loyal" customer base is worth billions, but the problem is Groupon’s customer base isn’t loyal. That has been the problem with the businesses that advertised on Groupon. Businesses couldn’t leverage deals in to loyal customers, and Groupon can’t either.
Groupon has the problem that it’s users only care about the deal of the day. They don’t care who brings that deal of the day to them. As other sites learn to under cut their commissions and build better value for the businesses they represent Groupon will fall by the way side.
Groupon isn’t Priceline or Expedia or Travelocity. There’s no ongoing relationship with the businesses they are repping. That limits their ability to build loyalty with the group that really matters. The Supplier. Groupon may have all the demand in the world for half price food, but if they don’t have someone to supply it, they don’t have a business model.