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Illicit Public Offering

October 14, 2011

As though you didn’t already know from anecdotal experience, it seems as though collective buying deals (e.g., Groupon and LivingSocial) sometimes are too good to be true. Consumer watchdog site called around the vendors of ten daily deals (five of which were Groupon/LivingSocial) and found eight instances where they were quoted a price over the phone that was cheaper than the advertised regular price being offered.

Given the questions swirling around the Groupon IPO, including accusations that it has overstated its own value through shady accounting practices, one wonders just how far the overstatements go. We’re certainly ripe for another internet bubble, and collective purchasing has so many competitors, and no serious barriers to entry, that one wonders how inherent the value of any particular company may be. But the fact is that “groupon” has practically joined the ranks of Xerox, Kleenex, and Google for the proper-cum-generic term for a thing, and that in and of itself has certain value in terms of the corresponding network effects, regardless of how “wildly profitable” it may or may not be.’s investigation is too small a sample size to have a whole lot of persuasive value in terms of statistical significance, but it does reveal the obvious fact that these sites are trying to sell you something you otherwise would not have bought. The same may prove true of the Groupon IPO. As my father frequently concludes a discussion on just about any topic: “perception of value.”

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