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Even at half the price Google bid two years ago, Groupon is no deal for potential buyers.
After sinking 79 percent this year, the online-coupon service is now valued at $2.8 billion and last month fetched a record low price-sales ratio, according to data compiled by Bloomberg.
As competition intensifies and demand wanes, analysts see revenue growth slowing to 0.6 percent in 2015, down from 45 percent in 2012 and the 1,233 percent average in the past two years, the data show.
Instead of selling to Google for $6 billion in 2010, Chicago-based Groupon chose to go public last year. While the shares surged 23 percent Friday amid speculation Google might still be interested, a bid isn't likely given Groupon's slowdown and because Google may find it cheaper to invest more resources in its own coupon business, B. Riley & Co. said. Groupon is diversifying income away from just coupons with Groupon Goods, an online store for discounted products. To Benchmark Co., that may deter possible buyers such as Facebook and Microsoft that haven't traditionally run retail operations.
"For somebody to buy it, you have to figure out what you are really paying for," Sameet Sinha, a San Francisco-based analyst at B. Riley, said in a telephone interview. "Their existing customers are buying less and less. They have no technology really to talk about. Their sales force is declining. Frankly, what are you buying it for?"
Julie Mossler, a spokeswoman for Groupon, declined to comment on the company's takeover prospects.
The company got its start in 2008 by selling coupons, known as Groupons, from businesses such as restaurants and nail salons. Groupon then shares the revenue with the merchant. Andrew Mason, the chief executive officer and co-founder, is trying to resurrect growth with the year-old Groupon Goods business, an e-commerce site where clients such as Dell and Garmin sell marked-down products.
Mason's role as CEO was considered last week at a board meeting, according to a person familiar with the matter who asked to not be identified because the issue is private. After the gathering, Paul Taaffe, a company spokesman, said Mason would keep his job.
Groupon walked away from Google's takeover offer in December 2010, a person familiar with the matter said at the time. The bid valued Groupon at $6 billion, including incentives that would have been paid to Groupon's managers if performance targets were reached, people who asked to not be identified had said. Groupon ended up conducting an initial public offering and was valued at $16.7 billion following the first day of trading in November 2011, data compiled by Bloomberg show.
After initially winning a market capitalization exceeding Google's offer, Groupon's stock has lost 79 percent since its debut amid accounting missteps, more competition and growth that failed to meet expectations. The shares fell to a price-sales ratio of 0.7 on Nov. 13, a record low, according to data compiled by Bloomberg.
On March 30, it reported a "material weakness" in its financial controls, forcing the company to reduce fourth-quarter revenue by $14.3 million. That followed the restatement of 2010 results six months earlier.
After revenue increased fivefold to $1.6 billion in 2011, Groupon's growth is slowing as the allure of daily-deal websites wears off among consumers and competition intensifies, according to Edward Woo, an Irvine, California-based analyst for Ascendiant Capital Markets LLC.
"Groupon didn't have any significant barriers to entry," Woo said in a phone interview. "When it first introduced this product, it got tremendous growth because a lot of people had never heard of it and wanted to use it. It was very novel. But now there's a bit of consumer fatigue."
LivingSocial is among the rival sites. Its struggle with slumping demand for online coupons forced Amazon.com to write down the value of its 29 percent stake this year, and prompted LivingSocial to say last month that it will eliminate about 400 of its 4,500 employees.
Analysts now project sales growth at Groupon will be 45 percent in the year ending this month, and growth will dwindle to just 0.6 percent in 2015, estimates compiled by Bloomberg show. To counter less demand for daily deals, Groupon introduced Groupon Goods, which sells everything from watches and bed frames to handbags and perfume at discounted prices. It competes against the likes of Amazon, the world's largest Internet retailer, as well as Gilt Groupe and Rue La La.