Groupon’s European allies in the clone wars

Groupon’s European allies in the clone wars
June 3, 2011 9:20 am by Tim Bradshaw

Groupon’s swift international expansion has been “critical” to its vertiginous growth rate. In the first quarter of 2011, 54 per cent of its revenue came from outside the US.

Maintaining that growth will be a vital part of its pitch to potential investors ahead of its initial public offering.

A trio of German internet entrepreneurs have played a key role for Groupon overseas: the Samwer brothers.

Groupon’s acquisition of CityDeal, the Samwers’ daily deals service, last year marked the beginning of its push beyond America.

Oliver, Marc and Alexander Samwer are often accused of taking the best Silicon Valley ideas – from EBay to Airbnb – and launching them in Europe. And as the founders of Jamba, they must shoulder at least some of the blame for the Crazy Frog ringtone craze.

But even if there is some truth to the copycat allegations, it’s an approach to business which has proven very, very profitable for the Samwers.

Alando, their first business in 1999, was an auction site which sold to Ebay for $50m within four months of its founding. In the mid-2000s, they backed MyVideo, a German site similar to YouTube, and StudiVZ, a German Facebook copycat sold for $100m.

In the last few months, they launched Wimdu, a private rentals marketplace akin to Airbnb, the US site that is attracting a $1bn valuation.

But their European Founders Fund has also made canny investments in the American “originals”, including Facebook and Linkedin.

Groupon faces an ongoing attack of the clones. Everyone from Facebook, Amazon and Google to Time Out magazine and a thousand tiny start-ups have seen its 1,357 per cent revenue growth (year on year for the first quarter) and tried to take a bit of it. Groupon says many have thrived by picking up the deals from merchants it has turned down. In such a competitive environment, having a little of the Samwers’ expertise in-house may be no bad thing.

Oliver and Marc Samwer founded CityDeal in Berlin in late 2009, a year after Groupon, sending out its first discount e-mail in January last year.

By May 2010, CityDeal had already attracted 1.9m subscribers in 80 local markets. Groupon, which had recently been valued at $1.3bn, swooped, buying the six-month-old company for a rumoured $100m. It was Groupon’s first move outside the US.

Groupon’s S-1 IPO filing reveals that CityDeal was bought largely in Groupon stock. It went on to make a further eight international acquisitions last year, for which it recorded a $204.2m charge, relating to the issue of shares to buy Citydeal and other related expenses.

The deal has worked out well, instantly giving Groupon a presence in major markets such as London, Berlin and Paris. Groupon now has operations in 38 countries, which – coupled with growth at home – added 79.7m million new subscribers in the year to March 31, 2011. International revenues went from zero to $265m during 2010, reaching $347m in the first quarter of 2011.

The Samwers are still very much involved in Groupon. Their Rocket Internet holding company owns 10 per cent of Groupon’s Chinese joint venture with Tencent, the internet giant, and Yunfeng, a local VC fund.

They also own around 10 per cent of Groupon voting shares and give over half their time to unpaid “consulting” services, for which Oliver Samwer received $0.1m in expenses and travel compensation last year, while Marc collected “less than $0.1m”

However, the Samwer brothers may already be looking to their next venture.

Groupon’s S-1 shows that its consulting agreements with them expire in October. In addition, “entities affiliated with CityDeal Management UG” have already redeemed shares worth $170m prior to the IPO.

With its Chinese venture already hitting stormy waters, Groupon warns of the Samwers’ looming departure: “We can make no assurances that the loss of their services will not disrupt our international operations or have an adverse effect on our ability to grow our international business.”

Tags: groupon, IPO, samwer brothers
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