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Groupon IPO Success Could Prompt Local Players As Market Matures: Strategy

Groupon’s IPO success set to spark local activity

By Michelle Hammond
Monday, 07 November 2011

It’s been revealed Groupon raised $US700 million after increasing the size of its initial public offering, with experts predicting the local market to witness similar activity as the sector starts to mature.

 

Groupon, now valued at almost $US13 billion, increased its offering by five million shares to 35 million in total, pricing them at $US20 each. This was above an initial range of $US16 to $US18.

 

The debut of the three-year-old company was one of this year’s most closely watched. Its tiny float represents just above 5% of the company, and helped drive up demand and price.

 

Telsyte senior research manager Sam Yip says Australia’s group-buying industry is still 18 months behind that of the United States.

 

However, he says we can expect to see similar IPO intentions among local players in the future.

 

“Australia is on its way to exceed $400 million [in group buying sales] this year but as to which company would be the first to file for an IPO, that’s a very hard question to answer,” he says.

 

The growth of the group-buying industry has led to a vast array of niche players in the local market, including cars, beauty, travel and wine.

 

Yip says as the market becomes more crowded, smaller sites will either merge or fold as their larger counterparts move into niche areas.

 

Scoopon general manager Jon Beros believes smaller players are at risk as the market matures.

 

“I don’t think everyone’s going to survive. Some will try to specialise in certain niche areas but there’ll be a lot of consolidation and some will fall out of the market,” Beros says.

 

The maturity of the market was recently reflected by the release of an industry-specific code of conduct, drawn up by industry groups and signed by eight of the major players.

 

The code was drawn up by the Australian Direct Marketing Association and the Interactive Media Industry Association.

 

It has been signed by eight of the major industry players – Cudo, Groupon, Jump On It, Living Social, Ouffer, Spreets, OurDeal and Scoopon.

 

The code is designed to boost confidence in group buying, which has come under attack recently for promoting overambitious deals that small business merchants are unable to honour.

 

“We’d love for the vast majority of the 70 group buying sites to sign up, but we have started with those that account for 80% of industry revenue, so that’s a good start,” Cudo chief executive Billy Tucker told StartupSmart.

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