Two years ago, Google offered to buy daily deal giant Groupon for $6bn. The Chicago-based startup, at the time one of the fastest growing companies in the world, refused. Late last year, it went public and saw its valuation soar to more than $17bn on the first day of trading.
It has been all downhill since then and on Tuesday, following an earnings report that disappointed investors, Groupon shares have plummeted more than 30% to their lowest level yet. Today, the market values Groupon at well under $4bn.
This isn’t surprising given the Wall Street is increasingly skeptical about Groupon’s business model. As one analyst put it, “It appears the daily deal business has run into a wall.” That may be true, but it’s just one part of the story. In reality, the demise of Groupon as we know it arguably has to do with the way Groupon handled its relationship with the local businesses it works with.