The network effects aren't a defense. The main defensible advantage is the customer brand. That's what the money is for - making sure it beats competitors to scale in every city in every country in the world.
I get that Groupon wants to be a strong brand, and it is probably rational to grow big quickly before other competitors establish themselves. However, I don't see how its valuation is defensible given how relatively defenseless it is against competition. It enjoys much weaker network effects than Facebook, and consumers' cost of using multiple services is much lower than, say, using both Google and Bing for every search. Also, how will they maintain high margins when competitors will likely offer up their services to businesses for a fraction of the margin?
The reason the brand matters is that merchants will only use a competitor if it can drive a meaningful number of customers. As long as Groupon is synonymous with daily deals for both merchants and consumers, it will be difficult for any large scale competitor to emerge.
