Why Groupon Matters

Yesterday, in my post “On Groupon and Google,” I derided Groupon as nothing more than a “COUPON WEBSITE.”

I was being dramatic to make the point that, if it wanted to, Google could quickly and effectively build something of similar scale to Groupon.

That’s not to say that Groupon itself isn’t incredibly valuable. And might even be worth $5-6 billion. Here’s why:

1. Brand recognition. Groupon is the Google of the deals space. When Groupon calls, merchants answer. And when Groupon emails, consumers open.

2. Relationships with merchants. Small/medium-sized (SMB) businesses in cities around the world look to Groupon as a shot in the arm for sales. Not unlike how they looked at Google a few years ago. The problem, of course, for SMBs is that Google taps out once all the relevant queries are tapped and bids get too high.

3. Relationships with consumers. Every day, Groupon sends me an email. And every day I look at it. I can’t think of many other brands I have that frequent interaction with.

4. Data. Groupon is sitting on a treasure trove of data. What offers people like. What offers YOU like. What price points make a deal tip. There are tons of companies that could monetize the heck out of this.

5. Revenue. Rumors are Groupon is doing anywhere from $800 million to $2 billion in annual revenue. That’s pretty easy to value.

Clearly, Groupon has built a fantastic company with tremendous value. But, as any entrepreneur knows, one of the keys to success is defensibility of the business model. And, as I pointed out yesterday, I’m not sure how defensible Groupon is… at least not when it has companies like Google keen on getting into its space. That’s why if I were Andrew Mason, I’d be getting mine while the getting’s good.