Opinion Brief

Groupon's risky future

Stiff competition, staff turnover, and a dip in revenue have some wondering if tech's latest darling has already seen its best days. Has Groupon already peaked?

Barely two years old, Groupon has quickly become the tech world's latest crush. It grossed a reported $760 million in 2010 (way up from $33 million in 2009), turned down a $6 billion dollar offer from Google last December, and is now in talks to go public with a valuation as high as $25 billion. But the daily deal site has had a rough few months. Revenue was reportedly down 30 percent in February and 32 percent in March; Groupon's president and COO, Rob Solomon, is on his way out; and a "tasteless" Super Bowl ad led to a slew of negative publicity. Are Groupon's best days, and deals, behind it?

Yes, the market is oversaturated: Sure, "Groupon made vouchers cool" again, but "users may finally be over it all," says Jessica Dickler at CNN. Traffic to daily deal sites has been on the decline in recent months, and that's no surprise. There are just too many of these sites out there — including chief Groupon competitor Living Social — and users are sick of having their inboxes stuffed with potential deals from so many places."Today's daily deal? Who cares"

And the competition is stiff: Living Social is hot on Groupon's heels, and expects to surpass Groupon's sales in 2012, says Erik Sherman at BNET. Meanwhile, big players like Microsoft, Google, and The New York Times are also looking to get into the coupon business. They already have tons of customers to reach out to, and because this is just a secondary source of income for them, they'd be able to take a smaller share of any deal revenue. That means better deals for customers — but bad news for Groupon."Groupon and LivingSocial: The next bubble waiting to pop"

Don't count Groupon out yet: "I know it's fun to handicap tech darlings," says Josh Walker at Business Insider, "but if you look and listen to what is happening in the daily deal space, you will see a very rapid and healthy maturation." Sure, there's a lot competition out there, and Groupon's had a couple of weak months, but there are also ample opportunities for companies that can provide users with quality deals that are tailored to them. "Why the daily deal business is not a house of cards"

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