When Groupon turned down a reported $6 billion acquisition offer from Google and announced plans for an initial public offering, the business press responded with a mixture of excitement and skepticism that, with the benefit of hindsight, the skeptics were right to feel.

The analyst who attracted attention by arguing that only a fool would invest in the Groupon IPO was not arguing against the company's short-term revenue figures, which were impressive, but against the durability of the business model underlying them.

The core problem, as the skeptics saw it, was structural. Groupon's model required constant acquisition of new customers and new merchants — a treadmill that generated impressive top-line growth but consumed cash faster than it was created. Merchant economics were questionable: deep discounts attracted customers, but whether those customers returned at full price was an open question, and many merchants who ran Groupon deals reported mixed results and declining interest in repeat participation.

The competition problem was acute. Groupon's model was easily replicable. Living Social, Google Offers, Amazon Local, and dozens of other daily deal services launched in the same period, compressing margins and forcing Groupon to spend aggressively on marketing just to maintain share. A business that depends on marketing spend to acquire customers who may or may not be loyal is a difficult business to value.

The IPO proceeded, valuing the company at over $12 billion. The stock price declined sharply in the following year as growth slowed and the underlying unit economics proved harder to improve than investors had hoped. The analyst's skepticism turned out to be well-founded.

The Groupon story became a cautionary tale about the gap between revenue growth and sustainable business model — a lesson that the next wave of high-growth tech companies would need to learn again.