Analysis: Groupon growth lures rivals and regulators

Wed Jul 20, 2011 4:19pm EDT
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By Alistair Barr

SAN FRANCISCO (Reuters) - Groupon Inc's rapid growth has attracted rivals and regulators, a twin threat to the largest online daily deal company as it gets ready for an initial public offering.

At a daily deals conference in San Francisco this week, executives from AT&T Inc, MasterCard Inc and Facebook described plans to expand in the industry. Google Inc, which tried to buy Groupon last year, is forging ahead with its own daily discounts on local goods and services.

"Groupon has faced big challenges this year and a lot of those have come from competitors," said Boyan Josic, chief executive officer of daily deal tracker DailyDealMedia. "It's a huge new sector that's growing like crazy and there are no real regulations or industry standards."

Last week, Connecticut's attorney general said Groupon's vouchers might violate state law. And industry regulation will be the topic of a panel discussion at a DailyDealMedia conference in September.

Groupon filed for an initial public offering in June, saying it hoped to raise at least $750 million. The IPO may value Groupon at $20 billion or more, although concern about competition and regulation may limit that.

"These problems call into question Groupon's valuation," said Harvard Business School associate professor Ben Edelman. "With competitors and regulators nipping at Groupon's heels, the company may be worth less than their prospectus suggests."

A Groupon spokesman said the company is planning on "working with regulators to explain our business model and practices," but declined to comment on competition.

DEALING GROWTH   Continued...