Groupon’s IPO is drawing lots of attention these days and could be much bigger than LinkedIn.  Damien Hoffman puts it in perspective over at wallstcheatsheet.com where he opines:

Groupon is hot. Hotter than LinkedIn.  It’s also a brilliant example of a smart team of people pursuing a Blue Ocean Strategy.

Unfortunately, the once blue ocean has quickly filled with red as countless competitors enter the space on a daily basis. A savvy investor asks, “What’s the barrier to entry?” NONE. The only competitive advantage large daily deal sites have is the size of the email lists they promote to businesses. However, in the case of local proprietors such as restaurants and spas, local newspapers and other businesses will likely have a MUCH LARGER email list of prospective local customers.

These are two primary reasons Groupon’s “high margin” business is actually losing a boatload of money:

“In the first three months of this year, it had a net loss of $103 million. (For all of 2010, its loss was $414 million.) What is it spending money on? Well, $180 million was spent on online advertising in the first three months of the year. It’s also paying 7,000 employees, which isn’t cheap.”

Basically, Groupon needs an ever-increasing army of employees to combat the omnipresent threat of local daily deal sites. They also need to spend a ton on marketing in an attempt to drown out the voices of competitors.