I think Groupon actually deserves high valuations. They actually have a clear and simple way to turn a profit. They also have a tremendous amount of business relationships that are hard to replace.
The big problem with Groupon, even compared to social networks, is that there's no network effect to help entrench their position.
Consumers might use a Groupon coupon today, a LivingSocial one tomorrow, and a Facebook one next week. There's no significant motivation for consumer loyalty.
I like Groupon too, but the Burlington Northern is going to be a significant player in freight shipping 50 years from now with a high degree of certainty. How sure are you about Groupon?
I definitely don't think they deserve the valuations they are receiving. I just think that they are much more worthy of being a public company than either Facebook or LinkedIn are. People are always going to want to save money, that demand isn't going away. People change social networking services like shoes.
I felt the same way about Facebook until I read Spolsky's "every time they figure out how to make 10 cents from their customers they get to fill swimming pools with money" comment. Facebook has also become defensible, in a way that almost provides an argument against Buffett: it's not a question of "which social network will take all the chips" (let me answer that for you: Facebook), but whether the social space is going to have a large value.
