Groupon’s 1,500% Growth Makes Google Look Lame

Groupon’s first quarter revenue of $645 million represents a 1457 percent year-over-year surge that dwarfs the first-year growth rate and total sales figures of legendary Internet growth names such as Google, Amazon and eBay.

The revenue metrics from year one to year two for Google were 352 percent to $86.4 million. Revenue for Amazon and eBay both increased more than 700 percent when they started out, according to Wedbush Securities. These don’t even come close to the Internet coupon commerce facilitator with subscribers figures rising eight-fold to 83 million last quarter, according to Wedbush’s emerging social media or "Second Internet" research unit.

"Groupon and the rest of the industry has grown so rapidly because, for the first time in history, merchants can leverage the Internet in scale," said Lou Kerner of Wedbush. "The deal commerce space is going to be massive."

This data was revealed in Groupon’s S-1 filing last week, a standard disclosure form in the run-up to an initial public offering. Based on reports, the offering of a few billion could give the company an overall market value of $30 billion, bigger than 400 members of the S&P 500.

But not all potential investors were mesmerized by this astonishing growth. Many can’t get past the $450 million loss the coupon pusher also reported in the S-1.

"Groupon has an indefensible business model, constantly needs new vendors and zero competitive advantage to justify a $30 billion valuation," said Joshua Brown, money manager for Fusion Analytics and author of the popular ‘Reformed Broker’ blog. "Warren Buffett wouldn’t spit in that moat," said Brown, referring to Warren Buffett’s famous investment advice about buying companies whose potential competitors have high barriers of entry.

That’s one of the bigger concerns for Groupon, with sites like LivingSocial (backed by Amazon), Facebook and niche players trying to take share.

"They will be buried by competition, and the restaurants and the like who ‘bought into’ the idea are now rebelling," said Dennis Gartman of The Gartman Letter.

Social networking stocks are the current obsession for Wall Street bankers, causing many investors to believe there’s a bubble brewing in these new toys before they even go public. LinkedIn, among the first to take the plunge last month, is trading more than 70 percent higher than its offering price. Of course, Facebook is the whale that everyone is waiting for to go public, with a potential market value as high as $80 billion, according to the New York Times.

"Groupon and LinkedIn are currently basking in a Facebook valuation glow," said Jim Iuorio, a trader with TJM Institutional Services.

Still with a potential valuation of as much as $30 billion, there are certainty those out there that believe the company can maintain its dominant position. After all, this is the company that turned down a $6 billion takeover bid from Google late last year.

Of course Google then went on to start their own deal commerce site, Google Offers, in less than five months.

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