Groupon and its owners, that’s who. The upstart deal-of-the-day website made headlines last week for rejecting a reported $6 billion offer from Google, which would have made Groupon’s founders and investors fabulously wealthy. No doubt Groupon’s growth has been phenomenal – since its founding a mere 2 years ago, the company has rocketed to 35 million subscribers and estimated 2010 revenues of over $500 million, and has been called by Forbes “the fastest-growing company ever”. In receiving multiple buyout offers in the billions so soon after its founding (including a reported $2 billion buyout offer from Yahoo earlier this year that was also rejected), Groupon’s founders have been presented a opportunities on a scale that few entrepreneurs will ever experience.
In turning down an enormous buyout offer and choosing to remain independent, Groupon’s management and investors are clearly confident that the company is worth even more – or will have better long term growth prospects on their own. There are certainly instances of companies who have spurned buyout offers on their way to becoming household web names – Facebook, Yelp, Twitter, and even Microsoft in its early days. But walking away from a huge and certain payout for an uncertain independent future carries tremendous risk. Groupon’s business model is relatively simple and potentially easy to copy – in fact, numerous similar competitors including LivingSocial, Youswoop, BuyWithMe, and Tippr, already exist. Plus, giants like Google, Yahoo and Facebook could buy or build a competitor that would be an instant threat based on their huge in-place network of followers and loyalists. For Groupon to succeed long-term on its own and be able to fend off the inevitable me-too competitors, they will need to leverage their current leadership position to build their brand and make it synonymous with deal-a-day offers, or even more broadly, with shopping discounts.
In electing to go it alone, at least for now, Groupon is making one of those game-changing bets that future pundits and business school classes will either call genius, or crazy. Was this the right move for Groupon – or a huge strategic blunder? We would love to hear your thoughts.