3 Reasons Why Groupon Will Go Public in 2011

Is Groupon ready for its IPO close-up?

This morning's New York Times' DealBook reports that the leading social coupon site is wrapping up a beefy round of financing as it works its way toward eventually going public.

By this time next year, it would be a shock if Groupon isn't public. It's not as if the fast-growing site actually needs the money. The company is apparently making a ton of money with its lucrative model, offering discounted city-specific deals where it pockets as much as half of the proceeds.

There are a few other reasons why Groupon should go public, even if it's already flush with cash.

1. Show the world you're over Google
It may have been shocking to see Groupon and Google (Nasdaq: GOOG  ) fail to hook up in what was reportedly a $6 billion buyout deal, but Groupon had its reasons.

Google is struggling to get its $700 million deal for ITA Software to clear antitrust hurdles. Did a $6 billion deal that would combine the world's largest advertiser with the undisputed leader in social coupons really stand a chance?

Groupon could have probably settled for less elsewhere. Yahoo! (Nasdaq: YHOO  ) , eBay (Nasdaq: EBAY  ) , or Microsoft (Nasdaq: MSFT  ) could have quickly closed on a deal for far less than $6 billion, but it would have been embarrassing.

Even if an IPO values the company at less than $6 billion, it will get there -- and then some -- if Groupon's growth trajectory continues. Going public is the one way to save face.

2. Going public means nearly free brand publicity
It shouldn't be a surprise to find consumer-facing websites gain traffic after going public. It's a brand awareness thing. OpenTable's (Nasdaq: OPEN  ) growth accelerated after last year's IPO, as curious foodies and intrigued eateries checked out the online reservations specialist.

There are filing costs and other expenses related to being a public company, so there is no free lunch. However, it will be a way for Groupon to distance itself from the competition.

3. Groupon may want to go public before LivingSocial or Facebook
Don't let anyone tell you that this isn't a race.

Amazon.com (Nasdaq: AMZN  ) just invested $175 million in distant silver medalist LivingSocial. Does Groupon want to see LivingSocial be the first one to go public, gaining the brand awareness edge?

On the other side of the spectrum, there's a pretty good chance that Facebook finally goes public in 2011. Does Groupon want to risk a lukewarm reception to the leading social networking site, a move that would likely nix interest in a Groupon deal? Does Groupon want to go public in Facebook's shadow, even if Mark Zuckerberg's huge site is successful?

Why wait for Twitter or Facebook? Why chance LivingSocial or BuyWithMe leapfrogging Groupon by going public?

The time is now. Like any deal on Groupon, the clock is ticking on the decision-making window. Have a nice IPO, Groupon.

Have you ever used Groupon or a Groupon-esque site for a deal? Share your thoughts in the comment box below.

Google and Microsoft are Motley Fool Inside Value recommendations. Google and OpenTable are Motley Fool Rule Breakers choices. Amazon.com and eBay are Motley Fool Stock Advisor recommendations. Motley Fool Options has recommended a bull call spread position on eBay. Motley Fool Options has recommended a diagonal call position on Microsoft. The Fool owns shares of Google and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Longtime Fool contributor Rick Munarriz is a fan of discount sites, and he's already tracking local deals through Groupon and LivingSocial. He does not own shares in any of the companies mentioned in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.


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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 02, 2011, at 5:40 AM, jeff432 wrote:

    Have you guys heard of the new Groupon like site?

    It's the same thing as Groupon except when someone signs up through your referral link, if they or anyone they sign up ever buys a coupon from this site (which you get in a daily e-mail), you earn 5% commission of the coupon purchase price! You earn 5% commission up to 5 levels deep!

    Also, if you sign up a business and they ever offer a coupon, you get 2% of all of their coupon sales!

    About 1000 members are joining everyday now.

    It is 100% free to join.

    There are no coupons yet since the company is in pre-launch.

    It is launching around March 2011 though!

    Check it out:

    http://newgroupon.thecustomeradvantage.com

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