Is Groupon a $3 billion company?

New rivals have the coupon website desperate to raise money at a steep valuation.

By Kim Peterson Nov 8, 2010 1:41PM
Coupons © Tom Grill/CorbisGroupon has had a meteoric rise, nailing its business model so thoroughly that it was profitable after a mere eight months.

But is it worth as much as $3 billion? That's a stretch. Yet that's what the coupon website thinks it's worth, and it's looking for funding along those lines. Faced with intense competition from startups and Internet giants like Facebook, Groupon needs more money to expand quickly.

Groupon is in 230 cities and wants to get to 300 by year's end, Bloomberg reports. The site offers a discounted deal each day for things like teeth whitening and restaurant meals, but only if a certain number of people sign up. The result? A popular site with great word of mouth and user excitement.

Groupon has already raised $170 million, Bloomberg reports, and was valued at $1.3 billion in April when it received a $135 million infusion from a Russian holding company.

The problem for Groupon is that it's just too good. That has led a number of rivals to jump into the business, including LivingSocial and Group Swoop. Facebook has a new Deals feature that gives discounts when users check in online. Wal-Mart (WMT) is even in the game with its CrowdSaver application. Post continues after video:
So now Groupon needs to expand fast to stay ahead of the pack.

Groupon expects to have 25 million subscribers and close to $500 million in sales for 2010, reports GigaOm.

Jay Yarow at Business Insider thinks Groupon might want money to keep from being acquired by Yahoo (YHOO), Google(GOOG) or Amazon (AMZN).

Groupon is smart to make a huge money grab and expand quickly, but there are too many deep-pocketed competitors to justify a $3 billion valuation. The way this business is going, Groupon might just remain a niche player, overwhelmed by Facebook and others.

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Tags: internet
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