Yahoo considering bid for Groupon for up to $2 billion | Hacker News Reader

Yahoo considering bid for Groupon for up to $2 billion

kara.allthingsd.com

29 pointscwan37 comments

Yahoo likely has the money/stock, but is GroupOn really worth it? They have the buzz, but J'aime Ohn (winner of Techcrunch Disrupt) had a great point in not supporting companies based on "destroying other businesses".

Groupon has the buzz and deals coming in. But their track record for satisfied "business customers" is spotty. As the reputation for spotty deals / lack of returns grows, the less likely Groupon (and related) are to find deals. It is a finite market.

That said, given it is a "finite market", with (in my uneducated view point) little upside, I can wholly see Yahoo entering a big deal. They haven't done much recently that makes sense, so over paying for Groupon would totally support that model.

I'm neither a groupon customer, nor do I play one on TV (nor do I use Yahoo regularly).

The only people who think Groupon destroys businesses are people trapped in the Hacker news echo chamber.

There is one article on a restaurant saying Groupon didn't work out, and that gets extrapolated to mean there is some fundamental problem with the business.

You learn to discount stories like that after a while.

Does Yahoo! even have $2 billion to spend on something? I don't remember them buying anything above a few million in a long time and Groupon doesn't scream 'turning around the fortunes of the company' to me

They have $4 billion in current assets, so could go all cash on a buyout. http://finance.yahoo.com/q/bs?s=yhoo

Cash and Short term investments stood at 2.75B as of June 30, as the article says their market cap is 19.5B. I would guess it wouldn't be an all cash purchase but likely a combination of cash and stock.

AOL is $2.68B with $2.5B in revenue

Yahoo should buy them, at least AOL have a new purpose that investors believe in.

Yahoo's recent acquisition attempts seem very disparate with no real overall goal (Yelp, Foursquare, etc.) or mission.

You make a good point, AOL would fit more into Yahoo's perceived strategy as being a content company.

Yelp, and Foursquare are great examples of the general lack of strategy or direction to those of us that follow the tech scene closely.

They need to decide whether they are going to play with the big boys and solve interesting problems or continue the web1.0 style of being a landing page.

AOL has insane expenses, negating all the revenues. They netted negative billion dollars in Q2 (in just one quarter!).

Their revenues are steadily declining: http://tctechcrunch.files.wordpress.com/2010/08/aolq2slide.j...

Buying AOL would be just dumb. I don't see them being profitable any time soon (if ever).

But most recent quarters have been positive with income in the tens of millions. Q2 had a large one time write down from restructuring.

Financially, AOL isn't looking too bad: http://www.google.com/finance?q=NYSE:AOL&fstype=ii

You're right.

However their margins are razor-thin in the previous quarters. Like Q4 of 2009 - net income of 1.4M (with 809M revenue).

We'll see how the restructuring goes.

You may be looking at the quarter where they wrote of Bebo, ICQ and a bunch of other assets

Could someone please explain to me how Groupon could possibly be worth $2 billion?? They aren't fully "mainstream" yet, and there service can easily be redeveloped.

I have not used them yet, is there something I am missing here?

If Groupon can really make $400 Million in sales this year at 50%+ margins on the deal then they could be worth quite a bit on the surface. However, with recent acquisitions and other costs, I would expect their expenses to be through the roof.

Problems:

-500 Employees is a lot of overhead. -Acquisitions are spendy, too, and add more overhead. -When businesses wise-up they are either going to have only Gap deals left or have to significantly lower their margins in order to drive real value to the merchant. Not every mom & pop business is going to fall for this "we sell it for $10 and give you nothing sales pitch."

I'm impressed with what Groupon has built, but the valuation seems inflated for a company that has so many vowels in its spelling.

...but they only get to buy Groupon if 500 companies commit to submitting a bid. And the offer's only good on alternate Fridays. :-)

can't they create a successful groupon clone with multi-million eyeballs they have?

not to mention the advertising sales team and contacts they already have.

Even Yahoo surely wouldn't pay $2billion for a domain name and a mailing list, would they?

I think that groupon should work to build an alliance with yelp or that they should consider a merger. I personally don't use groupon and don't particularly like the discounts they offer (i've viewed their options pretty regularly because i'm cheap.)

Yelp would've been a great fit with groupon because they both focus on local niche markets. Yelp often allows clients to offer discounts if the customer mentions "yelp." A great way for yelp to monetize their huge market and crowd-sourced reviews would be to allow individual business develop groupon like mini promotions.

I wouldn't be surprised if this type of product would help generate an entirely new level of revenue for both companies.

Its ironic that neither company has thought of this.

http://officialblog.yelp.com/2010/09/new-york-new-york-deals...

that is the worst attempt at the groupon implementation i've ever seen. i would never read the yelp blog and wouldn't be surprised if more than 90% of the users are similar to myself. if you're going to try to give discounts you'd clearly place the coupon within the actual review...

They send out emails. They're not relying on people reading the blog.

Also, http://www.businessinsider.com/yelps-first-daily-deal-beats-...

Yahoo physically reminds me of the comedic fool wandering about in a field of rakes, continually hitting himself in the face. Yet again, up comes the rake...

that fool had a net income of over $213M last quarter.

http://www.google.com/finance?q=NASDAQ:YHOO&fstype=ii

Profit or not, it would be incredibly foolish for I or any other person to buy Yahoo stock given their decade+ pattern of behavior of expending exorbitant amounts of money to buy companies that a) are not worth that much and b) eventually killing the companies they purchase. If Groupon is to succeed, I think they are best to remain independent at least for a few years and really try to grow their company. Personally, I'm tired of seeing potentially long-term successful companies being purchased and mangled by bigger companies that can't successfully expand or incorporate those startups.

Microsoft, Google, and Apple have profit margins that are roughly 3-4 times that of Yahoo.

You mean Homer Simpson? or was that episode a reference to an existing metaphor?

Let's go with metaphor. I've seen it happen to Homer and in old cartoons, on some movies, and even once in real life. It's quite a striking visualization, at least to me.

I thought that was Sideshow Bob's gag on the Simpsons.

Oh yes, that is correct

There was recent post on HN that said 50% of Groupon customers would not repeat. That's not a $2B company.

If 50% of the people who try a new product decide to keep using it, how is that a bad thing?

50% saying they would not repeat does not mean the other 50% would definitely repeat.

PS: It was actually 40% btw

Tell that to Comcast.

Comcast's offerings are arguably more "essential" and "desirable" to more people than Groupon's.

Great way for Yahoo! to confirm what everyone else thinks about them. That they are lost.

In her most recent interview (http://www.usatoday.com/tech/news/2010-10-08-bartz08_CV_N.ht...), Carol Bartz called Yahoo! "the largest media company in the world." What does local commerce have to do with media? Focus, Yahoo!, focus.

Yea but Yahoo does have some merchant services like Yahoo Stores and such, so this would complement those services.

who wants to be bought by yahoo? i think yahoo should move their buying spree in the asian region like their successful purchase of korpol.

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