Groupon’s momentum just keeps soaring. With their month over month traffic stats and word of mouth momentum soaring, they have managed to raise $173 million in funding and have a valuation of $1.35 billion. This is amazing for a company less than two years old.
During Groupon’s Accel round of financing in December of 2009, $30 million was used to cash out the founders and early insiders via $160 million in secondary stock sales.
Why is no one questioning this cashout at a startup?
Because sources say the company is generating $1 million in profit per week from the resale of deep discount coupons in most major cities in the United States. When a company's bottom line is doing as well as Groupon, investors do not mind founders taking money off the table. It is a smart and practical move for the founders and allows new investors to get a slightly larger ownership share.
Coupons sites are nothing new and have been a profitable area on the internet going back over a decade. With Coupon Cabin, Behind the Counter and Coupon Mom still industry leaders with strong traffic and profit for anything from Best Buy coupons to an Ebay coupon, Groupon had to come up with a new marketing concept to grow their site.
Groupon came in under the deal-of-the-day marketing method which has been used very successfully by Amazon, Buy.com and Woot. Once the industry saw that the Amazon's deal of the day section repeatedly became their top seller, an influx of companies came into the space centering their business model around the one deal every 24 hours.
Amazon Acquires Woot
Last month Woot, the pioneer in the deal-of-the-day space was purchased by Amazon for $110 million all in cash. Woot is known to have amazing deals that last 24 hours and often times sell out within a few hours. They sell everything from amazing laptop deals to trendy t-shirts.
Woot will continue to run independently as they always have but with the additional resources of Amazon at their disposal; fairly similar to the Zappos and Amazon acquisition agreement. This looks to be a great deal for both parties.
With the recent increases funding to coupon sites, creative marketing methods and acquisitions all signs point to strong continued growth in the coupon niche for years to come.
Comments (2)
Groupon has definitely cornered the market in pain-in-the-ass ways to save. You buy a coupon, but it's only good if enough people do the same? Gawd, are people really that cheap?
I like Groupon. They've got great deals and in most cases enough people buy anyway, so it's not really difficult to get the deal. The ecosystem is evolving - there's now marketplaces like www.lifesta.com were you can sell off your unused groupons or pick ones from other people if you missed the deal in the original sale.
What do you think?
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