Groupon not a Tech Company? Analysts are on the Attack

By: Chenda Ngak, CBS
By: Chenda Ngak, CBS

(CBS News) Is a daily deals website considered a tech company? Industry analysts weigh in on whether or not Groupon deserves to be among the ranks of public tech companies like Facebook or Zynga.

Groupon came under fire Monday following a Wall Street Journal article reporting that early investors have begun to jump ship.

Groupon is a website that offers daily deals, typically at a steep discount. The company came to national attention in August 2010 when it scored $11 million in one day, selling Gap store credit priced at $25 for $50 worth of merchandise. Previously known for offering local deals, it was the company's first nationwide campaign.

According to the Journal, early investors like entrepreneur and investor Marc Andreessen are giving up on Groupon. Andreessen invested $40 million in Groupon months before the company's initial public offering. It's been reported that Andreessen sold 5.1 million Groupon shares sometime after June 1. The Journal mused over the decline of stock prices of companies like Facebook or Zynga, which are profitable - unlike companies that were part of the original dot com bubble burst.

Groupon's shares are currently just under $5 per share. At about $20 per share, the company was valued at almost $13 billion on the day it began trading on the Nasdaq on Nov. 4, 2011.

One of the central themes that technology commentators are pondering is if Groupon is actually a technology company. Veteran technology journalist Om Malik doesn't think Groupon is anything more than a coupon distribution company.

"I tried very hard to understand the company and figure out its technology edge," Malik wrote on GigaOm. "When I saw Groupon, I saw a company that was essentially using e-mails to conduct what was essentially a coupon-clipper business."

Ouch.

Although Groupon exists online and uses the Internet to reach people, Malik suggests that the daily-deals company is novel because it uses the Web and social media to reach audiences, rather than traditional methods.

The hype surrounding Groupon is perhaps best described by The Atlantic senior editor Derek Thompson.

"No matter how you dressed it up, they said, the coupon business was still the coupon business and it seemed impossible to imagine that the most spectacular idea of the young century was to help groups get cheaper sandwiches and leg waxes," said Thompson.


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