David Heinemeier Hansson takes a look at the numbers behind the Groupon IPO:
At the moment, it’s costing them $1.43 to make $1, and it doesn’t look like it’s getting any cheaper. They’re already projected to make close to three billion dollars in revenues this year. If you can’t figure out how to make money on three billion in revenue, when exactly will the profit magic be found? Ten billion? Fifty billion?
On the other hand, Matthew Yglesias says that Groupon is an example of how to achieve growth through aggressive deficit spending:
Maybe this will work out, or maybe it will be a disaster. But it’s worth noting that absolutely nobody thinks it’s categorically absurd to think that what a firm needs to do to maximize long-term profits is boost spending over revenues.
It’s an interesting way to take a jab at critics of economic stimulus.
Update: Jason Kottke points out that Amazon.com operated at a loss for a long time before becoming the profit-generating machine that they are today.