Today in its quarterly earnings call, Groupon reported that it did not meet fourth quarter expectations. The company posted a $43 million loss, or $0.08 cents per share.
Despite the loss, Groupon’s revenue in the fourth quarter 2011 grew 194% to $506.5 million, up from $172.2 million in the fourth quarter of 2010. In fact, the fourth quarter 2011 was the company’s first quarter of operating profitability since it opening international operations in the second quarter of 2010. This brings everyone back to the same question: Is the daily deals model a real, legitimate business, or is it just a trend? Only the numbers will tell.
On the earnings call, CEO Andrew Mason mentioned the company’s expansion into Silicon Valley. In regards to the losses, Mason pointed out that Groupon is “still in the early days” of personalized commerce. It is an area that Groupon is rapidly expanding into. Earlier this week, it acquired Adku, a start-up focused on big data for ecommerce. Last month it acquired personalization service Mertado, which is focused on providing a better social shopping experience. With more personalized data comes two things: Greater responsibility surrounding privacy, and additional opportunities for Groupon to know its users.
On the earnings call, Groupon reported that the Grouponicus holiday promotion, which hit 40 North American markets, helped boost fourth quarter 2011 earnings. CFO Jason Childs said that because Grouponicus was such a success, Groupon is considering “occasional themed promotions throughout the year.”
Groupon also mentioned why it had a 1600% effective tax rate. Apparently, this was a result of building its international headquarter in Switzerland and profits in overseas countries. It expects that to to eventually drop into the “low 30s.” Keep in mind that the U.S. corporate tax rate is 35%.
The company says that it will be spending big on technology hires, referencing the new Silicon Valley facility but also mentioning an “initiative we’ve yet to announce.” Groupon says it is not planning on acquisition-related expenses in the near future.
And what of high marketing costs, the area that concerned many? Marketing spent as a percentage of revenue was only 31% in the past quarter versus more than 100% a year before. Will it shrink even further? “Whether it will get down to the 5-10% you see at Amazons or Netflix…that’s going to take a little while,” says Groupon’s CFO Jason Childs.
When Groupon went public last November, it raised $700 million in its IPO. That number is now up to $1.1 billion. One year ago, that number was a mere $119 million.
For the first quarter 2012, Groupon expects revenues between $510 and $550 million, which is 73%-86% more than first quarter 2011. Will Groupon make their goals? Either way, it’ll be interesting to watch.
Groupon really wants to get to know you.
Today the daily deals giant acquired Adku, which describes itself as an “early stage startup working on big data for e-commerce” with the goal of giving users “a more personalized experience.” Adku focuses specifically on e-commerce sites.
Ever since its public offering last November, Groupon has been working on personalizing its services. It acquired social shopping start-up Mertado earlier this year. Similar to Adku, Mertado’s goal is to create shopping experiences that “build bridges between content, commerce and community.” Adku focus is on bigger ecommerce sites; Mertado is more focused on home-related products.
The ecommerce space is focused on personalization. Last year, eBay bet $80 million on taste-graph recommendation technology Hunch.
San Francisco-based Adku was founded in 2010 by former Google employees.
Andrew Mason wants to know what your friends like to buy.
Groupon is expanding its Goods section with last Friday’s purchase of Mertado, a Silicon Valley-based social shopping start-up focused on letting consumers buy products through social networks such as Facebook. Mertado’s goal is create shopping experiences that “build bridges between content, commerce and community.”
“Mertado has shown a great level of innovation in the social commerce space–for example, the launch of Mertado TV, combining lifestyle video content and product selection,” a Groupon spokeswoman tells the Chicago Tribune. The Mertado website will officially shut down on February 28, 2012.
This announcement comes right on the heels of Facebook’s addition of 60-plus social apps to Timeline, which include shopping sites eBay, Payvment, LivingSocial and Fab.com.
Yesterday Groupon announced its new online appointment service, Groupon Scheduler, a tool that seeks to make online appointment booking easier. It was developed by OpenCal, a Vancouver-based start-up that Groupon acquired back in September. Groupon Scheduler removes the extra step of calling the merchant to book an actual appointment. Groupon users will receive a reminder email 24 hours before the appointment.
Groupon merchants can take this concept one step further by placing the “Book Now” button on their website so that people visiting the website (non-Groupon users) can book appointments with the GrouponScheduler tool. This means that merchants could use Groupon Scheduler in lieu of their own calendar software, which could be a perk for merchants that are already offering many Groupon deals. If they’re not, however, the “Book Now” button could become an annoyance.
Despite the acquisition, OpenCal will continue to operate for current users until further notice.
Is The Daily Deals War Coming To An End?
One year ago, LivingSocial received a $175 million investment from Amazon. LivingSocial does not have plans to go public anytime soon; it seeks to raise up to $400 million in an additional round of funding first.
On the first day of trading, Groupon’s shares started off at $20, closing out at $26.11. Its shares dropped off significantly to $13 only a few weeks after the IPO. According to Yahoo! Finance, Groupon’s most recent trade today went for $21.92.
Foursquare recently announced that it has more than tripled its userbase in the past year. With a 50-50 split between U.S. and international users, Foursquare has established itself as king of the location-based social networks. Foursquare’s announcement arrived on the same day as Gowalla’s official “we’re moving to Facebook!” blog post.
In June, Foursquare boasted more than 10 million users, which suggests that these last five million joined over just the past six months. Find out what caused this rapid growth after the jump.
Shortly after the 10 million user announcement, Foursquare began its daily deals partnerships. One of those included integrating Groupon’s deal service into the “Explore” tab of the Foursquare app. This was in addition to the Groupon Now location offering, which helps Groupon scavengers find time-sensitive daily deals based on where they are at that moment in time.
A month later, Foursquare made its brand pages DIY, allowing anyone to sign up for a brand page and push tips and check-ins to followers on Foursquare, Facebook and Twitter. The only thing a user needs to get started? A Twitter account. By simplifying the process, Foursquare lowered the barrier for entry and upped the number of brands interested in using the platform for promotional purposes.
Klout began factoring Foursquare data into social influence ranking, marking its first step into utilizing location-specific data. Despite what many say about the oft-controversial Klout, it is still recognized as an important scoring model for social media influence. Integrating Foursquare into its PeopleRank algorithm strengthened Foursquare’s brand and gave social media users yet another reason to sign up for the location-based service.
Foursquare tips lists, which also launched in August, helped users become trusted tour-guides for niche interests, further broadening the way users could build influence and trust on Foursquare. A few days later, Foursquare added movies, music and sports to its check-in options. As the push toward real-time became clear, Foursquare integrated Radar, a feature that sends users notifications when they’re close to a place on their to-do lists or any other Foursquare lists they follow. This feature also notifies users if their friends are getting together nearby. Most recently, Foursquare announced its “Save to Foursquare” button. With it, users can save places they read about online straight to their Foursquare to-do list.
Foursquare’s user location data is its biggest asset. As the number of Foursquare users continues growing, and with Gowalla shutting down to join Facebook, the location-based space increasingly belongs to Foursquare. How will it innovate next?
Source: How Foursquare Grew To 15M Users
Even though earlier this week Groupon’s stock dropped 35% below its original IPO price, a new survey from LinkShare says that more than half of people would still go for daily deals. The online marketing solutions site surveyed 1,000 people and found that 56% of people would still buy from a brand they didn’t recognize if the deal arrived at the right time. Forty-one percent of people said they had purchased something through a voucher or offer that they had never thought to buy previously.
These results run contrary to the idea that personalization is the key to gaining and retaining daily deals customers.
What if daily deals sites operated more like discovery engine StumbleUpon and less like increasingly personalized marketplaces? The study suggests that random offerings are actually one reason users stay on daily deal e-mail lists.
With stock shares sagging, however, leader of the pack Groupon still has a ways to go in firmly establishing the longevity – not the short, bubble-like burst – of the daily deals model.
In its first significant blog post since last Friday’s IPO, Groupon announced new deal types and places, which aim to further personalize daily deals. Now when you login to your Groupon profile, you can say which types of deals you like, submit addresses for deals near your home, work or other favorite places, and then say if you’re interested in deals for men, women, or both women and men. New personalization features keep up-ing the ante in the daily deals space.
Groupon’s deal types uses phrases like “cultural pursuits” and “white tablecloth,” whereas before favorite deals were divided into bland-sounding categories. The option to add your favorite locations in personalized deals puts further emphasis on location, which Groupon has already started doing with its location-based, on-demand Groupon Now coupons.
Here’s a screengrab of the previous personalization offerings:
Groupon competitor Google Offers updated its personalization aspects just last month.
Will daily deals become more personalized? Tell us what you think in the comments.
A new Forrester report entitled “Myths and Truths About Daily Deals” lays out the bigger challenge that daily deals sites are facing: More than 50% of consumers say they would have purchased the product without the voucher.
Most consumers who redeemed prepaid vouchers – 80% for clothing or shoe stores – were already customers of the brand. A whopping 51% of prepaid voucher buyers and approximately a quarter of flash sales buyers say they would have purchased the deal without the offers.
Similarly, 63% of respondents in the restaurant or food category said that they already shopped at a particular place, and 52% said they would have bought the product without the voucher. In home and garden, 67% already bought the product, and 49% said they would have done so without the voucher.
People Don’t Want More Emails
Groupon may brag about the size of its email “subscriber base,” but email is becoming increasingly less important. A sizable portion of subscribers have unsubscribed.
Forrester reports that it has heard “anecdotally that revenues for these sites are increasingly coming from organic traffic.” Is that why Groupon thought it was a good idea to cut its marketing and sales staff before going public? In its S-1 filing, Groupon said:
Our goal is to retain existing and acquire new subscribers by providing more targeted and real-time deals, delivering high quality customer service and expanding the number and categories of deals we offer.
The real challenge comes in converting buyers of daily deal vouchers into regulars.
What’s Really In It For Merchants?
Daily deals can generate short-term bursts of demand, true. This is where faster, on-demand offers like Groupon Now could play a significant role, especially for younger, more technologically inclined consumers.
Still, Groupon may offer a portal into some new consumers.
For merchants, it will be useful to track information about every redeemer of a daily deal. That means who redeems an offer, when and for how much.
Smaller daily deals knock-offs will disappear, but Groupon will stick around if it can prove to brands and merchants that it’s more than just the hot new thing, the shiny bling. That will probably mean less interesting deals, and a much smaller, not-as-cool looking company.