REV: JUNE 13, 2011
SUNIL GUPTA RAY WEAVER DHARMISHTA ROOD
n e as of On November 29, 2010, the technology industry wa buzzing with rumors o Google’s bid for Group pon, a two-y year-old web bsite that pro omoted daily deals offeri y ing deep dis scounts from local merch hants. Google reportedly offered at lea $3 billion, eclipsing a r e o ast rival $2 billion bid from Y Yahoo. And as Groupon re a esisted, Goog quickly rai gle ised its offer t as much as $6 billion.1 to s Ind dustry expert and financ analysts were sharply divided on Google’s mo and Grou ts cial w y ove upon’s poten ntial value. “A multibillion A n-dollar valua ation for a com mpany that is in a busines with virtua no s ss ally barrie to entry an is younger than my tod ers nd r ddler is absurd Forrester Research reta analyst Su d,” ail uchitra Mulpuru said blun 2 David Kirkpatrick, a former Fort ntly. K tune magazin columnist, sniffed, “Gro ne oupon isn’t even a techn nology company, for goo odness’ sake. It’s a discou unter that ha appens to us the se Intern net.”3 Bu others rega ut arded the company highl emphasizi ly, ing its specta acular growt Forbes cro th. owned Group pon the “fast test growing company ev ver,”4 while m media indust veteran a try and journalist John t Battel marveled, “I’ve never seen anything like it—we since Goog And just as Google la lle s g ell, gle. t apped the Ye ellow Pages in a fraction of the time, Gr n roupon seems to be on trac to do the sa s ck ame to Googl 5 le.” At the end of a frantic week, Groupon surprised m t n many observe by rejecti ers ing Google’s offer. Shortl after, the company anno ly ounced that it had raised $ $950 million f from private investors, and was d rumored to be laying the groun ndwork for an initial publ offering. T events pr a lic The rompted a br roader debat about whether Silicon Valley—whic had recent seen very high valuati te V ch tly y ions for Face ebook, Twitte and Zyn er, nga—was sho owing signs of another b bubble. Jeff Clavier, man naging partn at ner SoftTe VC and a well-known angel inves ech n stor, predicte “There m not be a b implosion but ed, may big n, down the road there will be a bu n unch of blood and tears.”6 d
Com mpany Origins
Gr roupon, a por rtmanteau of the words “group” and “ f “coupon,” gr rew out of Th Point, an o he online comm munity for col llective action The site hel n. lped people p propose and promote soci campaigns such ial s as com mpany boyco and chari fundraiser Each camp otts ity rs. paign’s creato specified i “tipping p or its point,” the pa articipation le evel that was required befo supporter were called to act. The ti ore rs d ipping featur was re _______ _______________ _______________ ________________ _______________ _______________ _______________ ________________ ______ Professo Sunil Gupta an Ray Weaver an Research Asso ors nd nd ociate Dharmishta Rood prepared th case. The auth his hors thank Paul Bu utler for contribu uting to online dat collection. This case was develope from published sources. HBS case are developed solely as the basis f class ta c ed es for discussi ion. Cases are not in ntended to serve as endorsements, sources of primary d s data, or illustrations of effective or ineffective manageme s ent. Copyrig © 2011 Presiden and Fellows of Harvard College. To order copies or request permission to reproduce ma ght nt H T n aterials, call 1-800-5 545-7685, write Ha arvard Business School Publishing, Bo oston, MA 02163, or go to www.hbsp o p.harvard.edu/edu ucators. This publica ation may not be d digitized, photoco opied, or otherwise reproduced, poste or transmitted, without the permis ed, w ssion of Harvard Bu usiness School.
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