Last Friday, Groupon joined the public markets with a $700 million initial public offering, the largest for a U.S. Internet company since Google’s in 2004. Initially priced at $20, share price surged to a high of $31 before closing the day at $26.11.
The much hyped IPO was met with varied reactions in the media, ranging from enthusiasm to skepticism. A number of media outlets viewed the success of the IPO as an indicator of more good things to come for tech startups, especially as big ticket companies such as Zynga and Facebook get closer to entering the markets. According to an article in The New York Times, A Good Day for Groupon and Internet Start-Ups, “analysts say [Groupon’s] strong first-day could usher in a second wave of investor enthusiasm for the next generation of Internet start-ups and embolden those companies seeking to go public.”
At the other end of the spectrum from The Times’ positive take on the event is an article by GigaOm’s Mathew Ingram, All the Groupon IPO really proves is that the bubble is back. Raising concerns about the viability of Groupon’s business model, Ingram argues that the success of Groupon’s IPO was driven by the tiny float of public stock (less than 5% of the total shares) coupled with high demand due to a long-term shortage of high-profile technology sector stock offerings. A Reuters article outlining similar concerns citing the low barrier for entry into this space as a real challenge for Groupon. Here at Rearden Commerce, we expect that the “daily deals” model will only succeed when offers engines provide real, concrete value for merchants – something we work toward every day. Audience insight, campaign analytics and flexible offer options will help give merchants higher returns and the deals industry more stability — this is not the stuff low barriers to entry are made from.
The huge success of Groupon’s IPO confirms that the offers industry is – despite some of the negative media hype – booming. According to MarketingVOX, “BIA/Kelsey is predicting the daily deal market will reach $2 billion this year, from $873 million in 2010. In 2015, the daily industry will be sized at $4.2 billion for a 36.7% CAGR, the firm reports.” Pretty impressive stuff. Rearden Commerce stands at a unique vantage point, we have a robust technology platform and a distribution channel aligned for merchants and consumers to accrue mutual benefit through the transaction of daily deals. It’s smart commerce and we like it.