DHH Recommends Passing on Groupon IPO

This post refers to shortlogic.tumblr.com

David Heinemeier Hansson, creator of the popular framework Ruby on Rails has shared his two cents on the impending Groupon IPO:

Groupon had to spend $208M on marketing in the first quarter and another $178M on sales people and the rest. Surprise, surprise — it’s costly to buy enough ads to reach the volume of consumers needed to produce such staggering revenue numbers. Likewise, hiring an army of 7,000-and-counting employees to cold-call every small business owner in the world costs a pretty penny, too.

As I said back in March I think sites like Groupon are trouble. There is no customer loyalty and competitors are popping-up left and right and in places like Facebook and Google where people are already hanging out.

I think the Groupon IPO will cause a whiplash for potential “web 2.0” IPOs. DHH feels the same, apparently.

(via Daring Fireball)