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Groupon Still Struggling to Change Its Luck

Posted on Tuesday, Nov 12th 2013

Daily deals market leader Groupon (Nasdaq:GRPN) just can’t seem to catch a break. The company tried to turn its luck by firing the founder and CEO, but that hasn’t seemed to help much. Recent inbox changes by Gmail and growing lack of interest among users to buy into daily deals are also not welcome news.

Groupon’s Financials

Groupon’s Q3 revenues grew 5% over the year to $595.1 million, driven by 24% growth in revenues from North America. Increased investments in EMEA have yet to deliver results. Revenues from EMEA fell 21% over the year and those from the rest of the world fell 4%. Groupon ended the quarter with EPS of $0.02. Analysts were looking for revenues of $613.0 million with a loss of $0.02 per share for the quarter.

Groupon’s mobile push has seen strong traction. Within North America, more than 50% of their transactions were from mobile devices. Globally, more than 40% of their transactions were initiated from mobile devices. At the end of the quarter, Groupon’s mobile app had been installed by more than 60 million people, with 9 million downloads being recorded in the previous quarter.

Among other metrics, the number of active deals at the end of the quarter grew to more than 65,000 compared with 54,000 a quarter ago. Subscribers who have purchased a Groupon within the past year grew 10% to 43.5 million with 19.9 million of them in North America, 14 million in EMEA, and 9.6 million in the rest of the world. The average revenue per customer per year dropped from $138 a quarter ago to $137 during the previous quarter.

During the quarter, Groupon spent $9 million to repurchase 770,900 shares at an average price of $11.67 per share.

For the current quarter, Groupon projects revenues of $690 million-$740 million, compared with the market’s projections of $723.7 million. Groupon expects to end the quarter with earnings of $0.00-$0.02 per share, falling significantly short of the Street’s projections of earnings of $0.06 per share.

Google Adds to Groupon’s Woes

The daily deals market has been plagued by lack of interest among subscribers, and Google has made life more difficult for these vendors. In a recent move, Google organized Gmail subscriber mail accounts to sort emails into Primary, Social, and Promotion categories. With online marketing mails spamming mailboxes, this automatic filtering has helped Gmail subscribers. But it has hurt several retailers as online shopping–related mails are pushed to the Promotions folder and are not viewed as frequently by subscribers. Like other retailers, Groupon has been upset, as Google’s move has led to consumers missing out on time-sensitive deals.

Groupon has taken several steps to ensure that it lessens the impact of such changes in the future, considering that emails sent out account for 40% of its deals transactions. The company is limiting the number of mails that are sent out to consumers and is also evaluating the option of operating a website that will not require users to log in using an email account. In addition, it is building a marketplace for online deals called Pull that will let consumers search for deals online instead of sending them deals in their area.

Groupon’s International Expansion

Groupon continues to invest big in international operations. Earlier this month, it announced the acquisition of Ticket Monster, a South Korea–based e-commerce player. Ticket Monster is a subsidiary of Groupon’s rival, It was founded in 2010 to cater to the South Korean market by providing online access to consumers looking to purchase goods and local and travel offers. Ticket Monster’s annual billing is expected to be more than $800 million. Groupon acquired Ticket Monster for $260 million.

Groupon’s stock is trading at $9.99 with a market capitalization of $6.65 billion. It touched a 52-week high of $12.76 in September 2013.


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