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Groupon IPO & BuyWithMe LayOffs

October 30, 2011

Two important milestones in the daily deal industry that has occurred in the past couple of weeks – Groupon filing for its IPO (scheduled for Nov 4th) and massive layoffs at BuyWithMe. Both these events have a tremendous impact on DesiSauda and we are watching these events very closely.

Now for the first event – never in the history of corporate world has a company went from a startup to IPO. Also never in the corporate history has a company’s business model been dissected, analyzed and thrashed/revered by so many pundits across the world. Also never in the business world has one seen a company that went ballistics (with the Google offer of $6B) to valuation of $25B and now less than half off within such a short time. I think that given the industry – intersection of retail and technology such a roller coaster is inevitable and we feel that as the industry matures there would be very few players left. Also the chatter about the industry, viability of the model and the accounting rules around profitability has increased tremendously after the Groupon IPO filing – I got 4.5M search results in Google within 0.19 seconds when I typed “Groupon IPO”. Come Nov 4th Groupon’s list price as well as how it performs will have a massive bearing on the industry – if it tanks then the naysayers will say “I told you so” but in case if it takes off, then still the naysayers would say “wait till it crashes”.
The brings to the second event – the massive layoffs at BuyWithMe. This company started off with a massive infusion of funds from Bain Capital and is considered the third in the line after Groupon and LivingSocial (still Google Offers is in beta stage). But I feel that apart from trying to be another “me-too” player BuyWithMe did not have any differentiated offering. From a vendor perspective if I am planning to go with BuyWithMe they are better off going with either one of the top two players. At the end of day either you are a niche player like us who caters to a very specific niche market or is in a dominant position within the entire market. On the same lines I have seen a recent article about Google Offers partnering with niche players like Mamapedia, Zozi etc to offer a wide range of deals to its customer base.
We are in a very exciting phase of the whole deal industry – where we see some shifts in the market place where there would be some consolidations amongst different players as well as shake outs. Let’s wait and watch the fun games…
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