Fadi El-Eter

I thought I’d never live to see this problem happen, but apparently Google is down. I’m not able to access it from any of my PCs, nor from any browser.

Now it’s up, but it was down for nearly 3 minutes, and that’s saying something for the most important website on this planet. Maybe I’m wrong, but Google, after all, is a website, and websites do go down.

Assuming this happened (Google went down for 3 minutes), how much did Google lose in revenue and net income?

Let’s see, Google’s total revenue in 2010 was $29,321,000,000, and its net income was $8,505,000, this means that:

– Google’s revenue per day is $80,331,506 (that’s $80 million) and net income per day is $23,301,369 (that’s $23 million)
– Google’s revenue per hour is $3,347,146 (yes, they make over $3 million an hour) and net income per hour is $970,890 (almost a million of net income per hour!).
– Google’s revenue per minute is $55,785 (each minute goes by, they make over $50,000) and net income per minute is $16,181 (what, only $16k per minute?)
– Google’s revenue per second is $929.75 (for every tick it’s another $1,000 of revenue for Google) and net income per second is $269 (at this point it’s not very impressive anymore!)

Now, if there were a downtime and if it were for three minutes, then the revenue that Google would have missed would be $167,355 and the net income missed would have been $48,543, a miniscule number that wouldn’t even appear as a blip when they “do the books” or “balance the sheets” at the end of each day.

However, if the problem becomes persistent, then people will no longer trust Google. I think the issue with Google is that expectations are too high, and if you go to Google and it is down, you would either blame it on your connection, your ISP, or your government. You would never ever think that Google is really down.

Probably no one will believe that Google was indeed down today, but then again, I might be wrong myself, and it might be my connection, my ISP, or the conservative government!

GOOG is trading just above the $500 level at the moment. Now if and when it falls below the $500 support (it almost did yesterday), expect the stock to become very, very bearish!

Most individual investors seek low priced stocks because of the following:

– They can afford to buy a lot of shares of these stocks.
– Their profit (and so will their loss) margin will be much higher than with high-priced stocks because of the leverage.
– They will benefit from high volatility that low priced stocks experience.

So, for those investors who are interested in playing with cheap stocks, I have compiled a list containing the top 100 stocks¹ that are trading below $5. I have ordered the list by volume (most investors are not interested in cheap stocks that have only a few thousand shares trading hands each day), and I have included the book value (a low priced stock trading below its book value is, in my opinion, attractive). Here’s the list:

With an average volume of 80 million shares (for some reason Google lists the average volume as 111 million shares, 31 million shares above Yahoo’s), SIRI is by far the most traded low priced stock (it was C until they did the reverse split back in May – C had an average volume of more than 400 million shares).

¹All listed stocks are either trading in the NYSE or the NASDAQ.

I have touched on the subject of Facebook Advertising vs Google Advertising in several of my articles, but I’ve never really dedicated a full article for this topic. But now that we’re sure that the Facebook IPO is imminent (it’s only a matter of time) I think it’s time to write a full article on the subject, because, after all, advertising is currently Facebook’s main source of income, and will remain so once the company goes public.

I’ll start by discussing the history of Google’s and Facebook’s advertising platforms, the strengths and weaknesses of each, how the two compare to each other, and which company will prevail as the master of online advertising once the war, that has not yet officially started between the two companies, is over.

History

History of Google’s Advertising

Google’s online advertising is officially called Google Adwords, and was officially launched on October, 23^rd, 2000. Google at first had only a few hundred businesses advertising with them, but the number grew quickly as companies started seeing value in online targeted advertisement (displaying ads depending on the user’s search). The concept is simple, you search for “buy computer” on Google, and you will see the following:

The listing in the above image contains advertisers who pay money for Google for each click they receive. In its simplest form, the advertisement that appears first belongs to the company who’s paying the most by click to target that specific keyword (however, note that often even if a company has the highest bid for a specific keyword, its ad still won’t appear on the top because its CTR is too low).

On March 4^th of 2003, Google introduced Adsense, which quickly became the favorite method for website owners to monetize their websites. Adsense allowed Google to make money from their advertisers for ads appearing on other websites (Google refer to these other websites as the content network).

On April 13^th, 2007, Google bought DoubleClick, which was a very prominent advertising company and one of Google’s main competitors.

On April of 2008, Google started using cookies to better understand the users’ search behavior on the Internet, so as to display to them even more relevant ads. Since most websites use at least one Google service, Google was able to track visitors from one website to the other (through their cookies), and was indeed able to serve very relevant ads.

History of Facebook Advertising

Facebook’s advertising is very recent when compared to that of Google’s. Facebook started allowing companies to advertise on its website in 2006. I remember back then the CTR was horrible (something like 1 click for every 25,000 impressions – how I know? I’ve used it in my previous company), even though the advertiser was able to select the demographics of the Facebook users he wishes to target. Not only that, most of the ads back then consisted of either games or scammy advertisements (by the way, the games were also scammy in a way). Last year, Facebook started cracking on these scammy ads and most of them were filtered out of the system, and as of then, the quality of ads being displayed on Facebook increased, and so did the CTR. Not only this, most of the ads that I see right now when I’m on Facebook are very targeted. They know my age, they know my background, they know who my friends are, they know everything about me!

Facebook still doesn’t offer ways for website owners to make money from their advertising, but sooner or later they’ll probably do.

Now that we’ve examined the history of the advertising business of both companies, let’s list the strengths and weaknesses of each.

Strengths and Weaknesses

Google Advertising

• Strengths
  • Mature: The company has been in the online advertising business for a very long time, it knows the ins and outs, it has probably done thousands and thousands of split testing to know what works and what doesn’t when it comes to getting these targeted clicks.
  • Trusted: I can’t think of any online advertising program that is trusted more than Google’s. The advertisers trust it – they know that Google will not overcharge them, they also know that Google will refund them for any invalid clicks – and the visitors trust it – they know that Google does not allow scammers to use their advertising program, they will also know that they won’t be infected with a virus if they visited a page advertised on Google.
  • Solid: When was the last time you saw their advertising system down? When was the last time you saw their advertising system screwing up the format of the page, or displaying weird and irrelevant ads? I can answer this myself: “I don’t recall when, maybe never!”
  • Exposure: Google is by far the most visited website on this planet. Ads on Google benefit from this immense exposure and are displayed billions of times every day.
  • Loved by the publishers: Publishers who serve Google ads on their website (e.g. those who use Adsense) are very happy with the extra (sometimes the only) income that they’re getting from Google. The more publishers use Adsense, the more money Google makes.

• Weaknesses

  • Guessing demographics: In cases where the user is not logged in to his Google account, Google has to guess who the user is, what his interests are, and what he wants at this very moment. Google does this guessing through cookies. But what if the user disables his cookies? And even if he didn’t, it’s still called guessing, right?
  • Can be very expensive for advertisers:There are some clicks, believe it or not, that cost the advertiser $80. Yes, you heard (or maybe read?) that right, a simple click by a little kid may cost someone, somewhere up to $80. On the other hand though, if the person is not making money from Google, he wouldn’t advertise on it.

Facebook Advertising

• Strengths
  • Very Targeted Advertising: As I stated above, Facebook knows everything about you, including your age, your gender, your location, who your friends are, what are your interests, etc… Facebook often doesn’t need to guess at all to know the information they need about you, and if any guessing is needed, all they need is understand who you are either by analyzing your friends and/or reading and analyzing your posts/comments (for example, if in most of your comments/posts you have the word “stock” then it’s a sure bet that you are interested in stock trading, and targeted ads will be displayed).
  • Potential: Facebook is still growing, and will keep growing exponentially for at least the next 5 years. Even now, most people who are willing to buy anything online are already on Facebook. That’s an advertiser’s heaven! He has the world to sell to, and all that he needs to do is make the right product, the right ad to promote that product, and target the right people. Unbelievable!
  • Loved by advertisers: Advertisers, whether local or international, are now turning to Facebook to advertise their products/services. Advertisers are offering freebies in return for a “like”. And the more “likes” an advertiser has, the more organic (not paid) traffic from Facebook they will have. Advertising on Facebook can result in viralness if many people like your product (someone will see that a friend has liked a product, so he takes a look and he “likes” the product himself, and then the friend’s friend checks this product and likes it, and so on…)

• Weaknesses

  • Immature: Facebook is still experimenting when it comes to advertising, they still toy with the placement of the ads from time to time. Additionally, the control panel that is used by the advertisers is still not as advanced as Google’s, and there are many features missing.
  • Not very trusted: I think this problem originates from Facebook’s decision to allow scammy ads such as those advertised by Zynga when they first launched their advertising program and for a very long time. However, people’s trust in Facebook’s ads is now increasing by the day.
  • Low CTR: Facebook’s CTR is still relatively very low, even though it is now much better than before, probably because trust in Facebook’s ads has increased.
  • Ads are only displayed on Facebook: In other words, Facebook doesn’t have a publisher program, which can potentially generate even more income than the one generated by the Facebook website itself.

Now that we have listed the strengths and weaknesses of both advertising platforms, we can compare the two…

Comparison Between Google Advertising and Facebook Advertising

• Google advertising is mature, Facebook’s advertising is not. +1 for Google.
• Google guesses information about it users, Facebook’s knows information about its users. + 1 for Facebook.
• Google is very trusted, Facebook is somehow trusted. +1 for Google.
• Google ads have a high CTR, Facebook ads have a much lower CTR. +1 for Google.
• Google’s growth, when it comes to acquiring new advertisers, is now predictable and somehow flat. Facebook’s growth is exponential. +1 for Facebook.
• Google is a website that existed for a long time, and is very hard (nearly impossible) to imitate (because of the underlying technology being used). Facebook, as a product and a brand, is becoming increasingly hard to imitate, and in a year or two, no one will be able to clone it technically. Tie.
• Google has Adsense, Facebook doesn’t. +1 for Google.
• Google doesn’t enjoy the same love and enthusiasm advertisers have for Facebook. +1 for Facebook.

And the Winner Is…

Looking at the above list, it’s obvious that it’s Google (which scored 4 vs 3 for Facebook), but only for now. Facebook is on its way to becoming very trusted with a mature advertising platform. And if and when that happens, then Google will have some serious issues to deal with, because once Facebook starts stealing advertisers from Google, Google will know that it’s the beginning of the end of its web dominance era that started shortly after the beginning of the millennium.

This’ll probably not happen until 5 years from now, and I really hate to see it happen, but if you think about it, Google did this to Yahoo, they just came up with something better, and when something better than Google comes along, Google must accept it with the same grace that Yahoo did.

I was just checking C, and I noticed that Citigroup and Bank of America are very close to each other when it comes to market capitalization. Citigroup has a market capitalization of $114.90 billion while Bank of America has a market capitalization of $111.16 billion, 3.25% lower than that of Citigroup.

I then thought, what are the 10 largest banks in the United Sates by market capitalization? I did a quick search and all I found was outdated lists, so I have compiled my own list. Without further talking, here are the top 5 US¹ banks by Market Capitalization.

So, we can see from the list above that JPMorgan Chase is the largest bank by market capitalization. A year ago, Bank of America was the largest bank by market cap, but the good times are over! BAC has to go up to $16.35 for Bank of America to retake its position as the largest bank by market cap. C, on the other hand, has to be trading at $56.70 (not impossible at all!) to become the largest bank in the world by market cap. All assuming, of course, that JPM is steady at $41.67.

¹All the banks listed are headquartered in the US and operate in the US.
²In billions of United States Dollars.

I became aware of contrarian investing before I started having my own business. It was my employer who explained the concept to me, and he told me how a great believer of this concept he is, and why. Although I was very new to the term, I have discovered that I have nearly always used it when purchasing stocks, and most of the times (over 90%) I made money on my stocks.

Anyway, Let’s explore what contrarian investing is, its strategies, and why it’s really the best thing since sliced bread when it comes to stock trading.

What Is Contrarian Investing?

Contrarian investing is when you go against the market and against the analysts’ opinion about the stock (whether positive or negative) and buy/short the stock in hope that the current trend will be reversed. If you think about it, contrarian investing is nothing new, in fact, it is based on the fact that all stocks experience upswings and downswings, and it’s better to sell a stock that has been going up for a while rather than buying another position in the same stock.

An Example of contrarian investing

As you already know, all analysts and all blogs are saying that RIM, as a company, sucks (and may go bankrupt), and that RIMM is doomed. But you know for a fact that Blackberry sales are increasing (How? Well you go and check your local retail stores!). So you go and buy the stock. Sooner or later the true truth will be unfolded, and the stock will skyrocket, and you’ll make a lot of money. Of course, contrarian investing shouldn’t be just “Hey, this stock is going down like crazy, everyone is saying horrible things about it, I think I should buy it”. You must do the necessary due diligence on the stock first. Additionally, there are stock that experience cycles (called cyclical stocks) – such stocks go up and down in a predictive manner (of course the long term trend is either up or down). A great example of a cyclical stock is a HNU (Horizons BetaPro NYMEX Natural Gas Bullish Plus ETF) – an ETF stock for natural gas (Canadian Market):

You can see from the above chart that there’s a cycle for HNU every month or so, it goes up and then goes down and then goes up, etc… Of course there seems to be an upward trend, but you shouldn’t care about this because you only buy when the stock is really down according to the trend and sell when the stock is relatively high, regardless of what analysts are saying about natural gas. This kind of trade will always work, as long as you are blessed with the virtue of patience.

What Are the Most Used Contrarian Investing Strategies?

Here are some strategies to use when doing contrarian trading:

– Don’t follow the herd (this is yet another definition of contrarian trading).
– Research the stock before buying or selling.
– Don’t get greedy when you start making money.
– Expect to lose on the very short/short term.
– Contrarian trading works best with cyclical and commodity stocks.
– Maintain your faith in your skills, and don’t get scared if you’re losing a lot of money. Your losses will be reversed sooner or later.
– It’s always better to go bullish with contrarian trading rather than bearish (e.g. buying stocks that are falling instead of shorting stocks that are going up). This is because the nature of the stock market: it always goes up on the long term.
– Never play this game with stocks that are non-cyclical and are locked either in a bullish trend or a bearish trend for a long time (a long time means over 6 months).
– Never go bullish with a company that is losing money, even if it’s a cyclical stock.

If you apply all the above then you will have a great potential of making a lot of money, while others who have recently rode the trend (bought at a very high price based on analysts estimation), will be crushed.

Why Is Contrarian Investing Great?

Well it’s because the potential of making money is very high, and the risk of losing money is very low. Let me explain, when everyone, all of a sudden, is saying “sell this stock”, “sell this stock”, this means that really big investors want to buy. Most market analysts are paid by large investors to spread rumors/propaganda and to encourage people either to sell or to buy stocks. When you buy, they sell, and when you sell, they buy. So, let’s say you bought an already beaten stock, how low can it go if it’s already beaten to death? But how high can it go now that it’s dirt cheap? Think about it…

After my recent post on the top 100 stocks with low P/E, I started wondering, if these stocks have such a low P/E, it means that they do not attract investors. But why is that?

I looked at two very known examples of stocks with low P/E: AIG and RIMM. These stocks have a P/E of 2.64 and 5.80, respectively. Both are huge companies, but they seem to be unattractive to investors. Let’s look at each company individually.

AIG: American Insurance Group was considered too big to fail by the US government, but it did fail, from an investor’s perspective, when its stock fell below the $10 level in 2009 after trading at the $1,400 level a year earlier (both prices are after taking the reverse split of 1:20 that happened on July 1^st of 2009 into consideration). Many investors flew the stock, after being burned badly from its collapse, and never returned. Very few investors saw value at the $10 level and started buying the stock at this point, while others started following the herd and the (positive) rumors, and started buying the stock when it went up again to the $50 level. The stock now dropped to below $30 (it is currently trading at $27.90). Most traders now refuse to be fooled again by this horrible stock, and are staying clear from it, until sustainable growth in the US economy is evident.

RIMM: Research In Motion is a Canadian company that is refusing to adapt to the current market conditions and demands. They are producing horrible devices, ignoring their cash cow, and if they persist on doing so, they will go bankrupt. RIM is a perfect example on how investors treat a company not based on its current earnings, but based on its future earnings, and most investors do not see any future for RIM if they (RIM) do not address the flaws in their business strategies.

As you can see from the above, investors do not trust neither AIG nor RIMM, and that’s why both stocks are trading at this very low P/E. Although both companies are making a lot of money now, investors are wary of these companies’ future, and they want to see a complete change in direction before trusting these companies again.

Now there are other reasons why investors mistrust stocks (resulting in them having a low P/E), these reasons include:

• Scam rumors: Rumors that the company is lying about its balance sheet.
• Company probed: The company is for example probed by the SEC.
• Risky market: The company operates its main business in a very risk market.

Now a question that many investors ask, what is a healthy P/E ratio? We now know that a P/E that is too high means that the company is overvalued and a P/E that is too low means that investors do not trust the company for one reason or the other.

I believe that a P/E between 10 and 25 (±10%) is considered to be healthy. If you take a look at most well funded companies with strong balance sheets and a reputable history, you’ll find that their P/E is within that range. Take a look at GOOG, AAPL, and MSFT.

I understand that Google is always trying to impress us with something new on their webpage, something original, like an image or something. But I have recently noticed that the frequency of the doodles (when Google replaces its own logo with another image celebrating a person, an idea, a holiday, or a country) is increasing, and not only that, they are becoming more interactive, which is becoming very annoying.

Today was by far the most annoying one. It was a guitar that whenever you passed the mouse over, you will hear it playing, which becomes frustrating when you visit Google 20 times/hour. I remember another annoying doodle was about an animated dancer.

I just go to Google to search because they return the best search results, I don’t expect to have fun in my search endeavor, I just want to see what the results of my search are. I hope Google changes its strategy that consists of publishing doodles nearly every other day on their global website. Google’s simplicity and focus on the results was what made their search superior to the competition in the first place.

OK, now how does this relate to stock trading? I believe that now Google is trying to make its search experience more fun (or so they think) to sustain control over the web search market, and to make Facebook’s job much harder in case they (Facebook) want to expand into the search market (because if they do, Google will face some serious issues). GOOG is still in a downtrend and is currently trading at around $516.

You can see a list of all the Google doodles here; you can easily notice how the frequency increased over the years, especially as of 2010.

Long term investors seeks stocks with the high dividend yield, as they prefer to make money on a recurring basis rather than selling and buying stock to make money (which can be very risky).

Some stocks can provide investors with dividend yields up to 40%, so, you can invest $100,000 in this stock at the beginning of the year and make $40,000 by the end of the year. Provided, of course, the company still exists.

Now what is the stock with the highest dividend so far in 2011?

It is TGS (NYSE:TGS) which is issued by Transportadora de Gas del Sur SA (what, you haven’t heard of this company before?), an Argentinian based natural gas company. TGS has a dividend per share of $1.5, a dividend yield of 41.61%, is currently priced at $3.61, has a P/E of 12, and it has been trading in the NYSE since November of 1994, so it’s not like a Chinese stock that was listed yesterday, and employing some Ponzi scheme technique offering high dividends to lure investors.

Now, let’s look at closer at TGS, the company has a very low volume. On average, only 85,000 shares trade hands each day, doesn’t this raise some eyebrows? If the stock is offering a dividend yield of 40%/year ($1.5/share), why aren’t investors flocking in?

Well, let’s take at TGS’s chart for a second:

You can see form the above how the stock dropped almost $2 in 2 days 2 weeks ago, and that’s why investors are staying away from this stock, because it’s dangerous. Let’s do some math here: Imagine you bought 10,000 shares of this stock on January 20^th at around $6. The stock right now is trading at $3.61, let’s assume that the stock will close this year at $3.61. If you want to get out of the position by the end of the year, then here’s how much you would have made:

Total cost: 10,000 x $6 = $60,000
Sold at: 10,000 x $3.61 = $36,100
Dividend: 10,000 x $1.5 = $15,000

You made: $36,100 + $15,000 – $60,000 = -$8,900, or about -15% of your initial investment. What an excellent idea to make money!

Usually very high dividend yields are associated with underperforming stocks, that’s why investors stay away from them. The old saying All that glitters is not gold applies perfectly to stocks with high dividends.

By the way, my personal opinion is that TGS is at a bargain price right now, but I’m not going to buy it.

Citigroup Inc. (NYSE:C) is now trading at $36.81, just $0.60 above the 52 week low. But how low can it go? I think there will be huge support at the $35 level, but if that support is broken, then the stock could go down to $30.

But the question is, is C a bargain at this very moment? I believe it is, in fact, I’m sure it is, and if you look at last June, you will see that the stock wasn’t doing great at that time of year either (maybe it’s a seasonal thing). I still believe that C has the potential to touch the $60 level by the end of the year, so if you buy now, you will be able to make 50% gain until the end of the year. I’ve always made money with C.

There’s no reason for C to go down, with the exception that the whole financial sector is not doing great, and is currently under skepticism by small and institutional investors alike, but when the bearish sentiment goes away, then the stock will definitely jump. By the way, let’s not forget, the past two weeks were a bloodbath for the market in general.

I expect C to fall below the 52 week low, only to rebound to at least $45 next month.

By the way, I have reported a couple of days ago that BAC will break the 52 week low, and it did, the same day! I’m getting pretty good at this! However, I still don’t think that BAC is a bargain, that stock is crazy and if it goes below the $10 level and starts trading in single digits, then it will be in freefall! Let’s see!

There are two long awaited IPOs after LinkedIn’s: Groupon’s and Facebook’s. We know that the latter is somewhere in the distant future, but for Groupon, its IPO will be in a matter of months, if not weeks.

But how much is Groupon worth in real life? I’m not talking about buying the rumor and selling the news. I’m talking about facts. Anyone over the age of 18 will tell you that any company is worth something if one of the following is true:

– It is profitable
– It is making money, but not yet profitable. But it will be profitable in the near future.
– It is not making money, but will make money in the near future, and will be profitable in the medium to distant future.

If anyone knows of another scenario by which a company is worth something, then by all means, share!

Looking at the list above, where do you think Groupon falls? Obviosuly nowhere. Here are some facts:

– Groupon is not profitable – in fact, it lost $540 million in user acquisition and other operational costs since its inception in 2008.

– Groupon is making money, and is not yet profitable, but will it be profitable in the future? I don’t think there’s even the slightest chance. There are some heavyweight companies seeing a lot of value in the coupon business (I think this is any oxymoron by the way, “value in the coupon business?”), these companies include Google and Facebook. Not only that, Groupon has spawned a myriad of smaller clones (some say more than 400), a dozen of them are serious about the business (they spend a lot of money in user acquisition), such as LivingSocial, DealFind, etc… It’s amazing, I never ever thought that the coupon business is that lucrative, even when offering one coupon/day, which may or may not be something people want.

Anyway, I don’t want to discuss the business model, all I want to know if Groupon is actually worth something when it becomes public. Let’s examine more facts:

– Customer acquisition costs are increasing: Groupon knows about this and says that once a customer is acquired, it no longer needs to spend money on that customer, and that customer will be a “cash cow” for the rest of his miserable¹ life. This may be true if you overlook an important factor in any business: competition. I remember that the same month I knew that Groupon existed, and that was less than a year ago, I started seeing ads for LivingSocial, and afterwards, I started seeing local ads for other coupon websites (that seemed to be available only in my area). The problem with Groupon is that the website can easily be cloned, and it was, hundreds of times! It’s only one pie, that used to belong exclusively to Groupon, but now you have many other websites that want a share of that pie too! But why are customer acquisition costs increasing? If you have ever used Google Adwords (Groupon’s main advertising platform), you will know that when you advertise for something, your cost per click is based on how much money other people are willing to pay to get that same click. In other words, when more people are advertising for the word “coupon” or “coupon website”, then the higher the cost per click is. Just search for the word coupon on Google and see how many ads you will see.

– Groupon is not changing in this ever-changing world: When Groupon was launched, it was a fresh concept that took everyone by surprise, everyone liked its sleak (and intelligent) interface. But now when you go to the Groupon website, it’s still the same, the same concept, the same features, the same everything. Groupon is not Google (and even Google is changing by the way), so it cannot afford to remain static.

– Facebook will kill Groupon: Unfortunately for Google, Groupon, LinkedIn, and other websites, there is a company that operates from California called Facebook that has hundreds of millions of real users. People go to Facebook every day, and it won’t cost Facebook a penny to advertise its own “Deals” service to its users, and it doesn’t need to guess who they are, where they are, what their interests are, what their background is, it already knows all these things! It has a huge advantage over anyone else. Imagine what would that do to Groupon. Oh, and in case you don’t believe me, check how Facebook has already shaken management at Google.

– Money delays the catastrophe but it doesn’t avoid it: Why am I saying this? Groupon is asking for $750 million from the investors? Why? So that they can spend more money on advertising, but what will happen if all the money is spent, and the company is still not profitable. That’s a very likely scenario, in fact, that is the only scenario.

– The coupon market will soon be saturated: And this is not only because of the increasing competition, but because people (yes I know it should be money) do not grow on trees. Groupon’s clickthrough rate will start going down at one point, as people who are interested in coupons will be already with Groupon (or one of its many competitors), and those who aren’t were never and will be never coupon users anyway. This reminds by the way of the stockholders’ expectations when it comes to Netflix: they think that the market is infinite even when the Netflix’s market penetration rate is already very high.

I’m sure that the most junior accountant will be able to see that the numbers won’t work. This company will never make money to cover its operating costs. Do the Groupon people know this? Unless the company is run by morons, I’m sure they do. But guess what, the real moron is the person who’s going to buy and hold that Groupon stock even for a few days after the IPO, because the money he’s going to spend will be in fact going to Groupon’s initial investors and executives, who are going to jump ship at the first opportunity. Oh, and while jumping, they’re going to yell “Suckers” at all the investors who bought this worthless, if not scammy, stock.

Yesterday LinkedIn, tomorrow Groupon, and after tomorrow Facebook²: NASDAQ crash of 2013, here we come!

¹: If you’re going to spend your whole life searching for coupons, then you definitely lead a miserable life.
²: I believe that Facebook has real value, but it will be hugely overvalued by investors, who will probably pay 200% more (of the initial offering price) at IPO just to acquire the stock.