The coupon/discount space has been hotting up over the past couple of years with the massive expansion of Groupon, but it seems the more traditional coupon sites are also being swept up in this bubble as demonstrated by a $1 Billion valuation of Coupons.com.
The valuation, which comes courtesy of a $200 million investment from a group of institutional investors, including several mutual funds, is likely part of a gearing towards a potential IPO in 2012. This investment is to be used by the company to grow the use of coupons online, the fastest growing sector of the coupon industry, which will become increasingly important as print media continues to fall on hard times as they try to embrace digital technologies and the disruption of the internet.
The growth of the coupon/discount sector can be, at least in part, attributed to the worldwide recession over the past couple of years, as consumers have tightened their belts and have started to look around for deals. Indeed, Coupons.com has been around since 1998, with this funding being their sixth round, but 2010 was the year the company surpassed $1 billion in printed coupon savings – a major milestone.
Now the problem with all of these discount/coupon companies is that whilst they have an obvious value to consumers, they value to the businesses they are discounting may be less obvious. There have been numerous stories in the press about Groupon deals resulting in lost profits rather than an increased userbase or profits more directly, and traditional coupons are no different. The value of these sites is in their consumer reach as companies try to attract new customers, but with the discount market increasingly saturated there is little space to innovate or to stand-out from the crowd and if a website is not the number one destination for coupons it actually offers very little value to its advertisers.