Groupon fights for its life as daily deals fade

CHICAGO/SAN FRANCISCO, Mon Nov 12, 2012 – Groupon and its compatriots in the much-hyped daily deals business were supposed to change the very nature of small-business advertising. Instead, it is the daily deal vendors that are racing to change as evidence mounts that their business model is fundamentally flawed.

Groupon last week reported another quarter of disappointing earnings as its core business stagnated, sending its stock down 30 percent to an all-time low of $2.76. Its biggest rival, Living Social, is piling up losses, and part-owner Amazon.com earlier this month recorded a quarterly loss after writing down its Living Social investment.

Both companies are racing to diversify, venturing into more generic ecommerce areas like off-price sales through ventures such as Groupon Goods and LivingSocial’s Shop. Meanwhile, upstarts are developing new variations on the discount coupon theme.

“It’s clear that they need to have other models besides the email daily deals business,” said Aaron Kessler, an analyst at Raymond James. “The problem is that a lot of these newer businesses have lower margins.”

Critics say the torrid growth that enabled Groupon to go public at $20 a share just a year ago was fueled by merchants buying into a new type of marketing that they didn’t fully understand. The discounts offered through the Groupon coupons have turned out to be costly, and the repeat business they generate uncertain.

eBay takes on Groupon over daily deals

SAN FRANCISCO, Wed Oct 10, 2012 – EBay Inc. has quietly launched an online marketplace for deals on local services, taking on Groupon Inc. and expanding into a potentially big category.

Groupon shares fell 4.3 percent to $5.05 in afternoon trading.

The news of eBay’s deals service emerged as the e-commerce company unveiled a major re-design of its website, adding Facebook-like features it hopes will spur more sales.

Called eBay Lifestyle Deals, the daily deal offers are being run in a limited number of urban areas, including the San Francisco Bay area, Los Angeles and Washington D.C.

Recent deals included $12 for a one-hour dog-walking service worth $25; $50 for a month of Yoga classes worth $110; and $180 for six private gym sessions worth $360.

The move is potentially a big step for eBay, which has traditionally focused on products rather than services.

“We have a big marketplace and a lot of people who come to eBay don’t just come for one thing – they stay and buy across categories,” said Devin Wenig, president of eBay Marketplaces.

Groupon launches credit card payment business

CHICAGO, Wed Sep 19, 2012 – Groupon Inc.launched a credit card payment business on Wednesday, entering a crowded field to compete with eBay Inc.’s PayPal and start-up Square Inc.

Groupon said the new service lets restaurants, salons and spas, retailers and other local businesses accept credit card payments at a lower rate than other providers.

Any merchant that runs a daily deal with Groupon in the United States can sign up for the payments service, the company added.

Groupon will charge 1.8 percent for MasterCard, Visa and Discover cards, on top of a 15 cent fee per swipe. For American Express cards, it charges 3 percent plus the 15 cent fee.

Groupon is the world’s largest daily deal company, offering discounts on local services. But the company is branching out into other businesses, such as discounted product sales, and now payments.

Groupon shares rose 7.5 percent to $5.04 on Wednesday. The stock has lost about three quarters of its value since the company went public last year.

The payments business has become crowded in recent years. Square, a start-up backed by Twitter co-founder Jack Dorsey, has won small merchants as customers by offering easy credit card acceptance through a small swipe device that plugs into smartphones.

PayPal launched a rival service earlier this year called PayPal Here.

Barclays downgrades Groupon on shift to low-margin business model

CHICAGO, Tue Aug 21, 2012 – Barclays Capital downgraded Groupon Inc. to “underweight” from “overweight” and cut its price target on the stock as the company faces a slowdown at its core daily deal business, forcing it to rely on its lower-margin discount business.

Shares of the company looked set to open down 2 percent on the Nasdaq on Tuesday morning.

The company is also making changes at the top, but investors have been skeptical that CEO Andrew Mason has the ability to turn the business around.

“The sale of products or “Groupon Goods”, which practically didn’t exist two quarters ago and represented an immaterial amount of first-quarter sales, represented the vast majority of incremental sales growth in the second quarter,” Barclays analyst Mark May said.

A continuation of this trend could hurt Groupon’s margin profile, he added.

Groupon often takes inventory risk with its Goods business, which was launched in the third quarter of 2011, as it buys products in bulk at a discount and sells them to customers at higher prices. However, Groupon Goods may not be as profitable as its original daily deals.

Groupon hits low on Evercore downgrade, $3 price target

SAN FRANCISCO, Fri Aug 17, 2012 – Groupon Inc. shares slumped to a new low on Friday after an analyst raised concerns about the future effect of slowing growth on the daily deal company’s large cash position.

Groupon shares were down 8.0 percent at $4.60 in early afternoon trading on Friday, after sinking to a record low of $4.51 earlier in the day.

The declines added to a swoon in recent weeks that has enveloped not just Groupon, but several consumer Internet and social media stocks including Facebook Inc./and Zynga Inc.

Groupon’s losses on Friday came after Evercore Partners analyst Ken Sena downgraded shares of the largest daily deal company and set a $3 price target on the stock.

Groupon missed Wall Street’s second-quarter revenue expectations earlier this week. Gross billings, which reflect the money Groupon collects from consumers who buy its daily deals, fell during the second quarter, the company also said.

“We see potential for future cash burn assuming billings declines persist,” Sena wrote in a note to investors.

Groupon has more than $1 billion in cash and the company generates a lot of working capital because it collects money upfront from customers who buy its vouchers and it then takes at least 30 days to pay merchants their share.

Groupon CEO, founders to keep shares after lockup

NEW YORK, Thu May 17, 2012 – Groupon Inc. Chief Executive Andrew Mason and the company’s other founders are planning to keep their shares in the company after a trading lock-up expires on June 1.

Groupon’s lock-up expiration will allow some pre-initial-public-offering investors to sell their shares, and analysts say that the approach of the expiration has put Groupon’s stock under additional pressure.

“We have no intention to sell,” Mason said during a webcast of an investor meeting on Thursday, adding that he believes in the long-term future of the online coupon company.

Groupon shares were down about 6 percent or 80 cents at $12.25 on Nasdaq in morning trade. But Clayton Moran, an analyst for Benchmark Co, said this was due to the volatile nature of the stock rather than anything Mason said.

“To hear that a third of the shares are not going to be sold is somewhat encouraging,” the analyst said.

The fact that Groupon sold a small chunk of its equity in the IPO makes such expirations more important.

Groupon shares jump on upbeat first quarter results

CHICAGO, Tue May 15, 2012 – Groupon Inc. shares jumped 22 percent in premarket trade on Tuesday after the daily deals company posted its first quarterly profit as it signed up more customers and merchants.

“While billings, revenue, margins, and guidance all met or exceeded, signs of accelerated North American revenue shows that the company’s technology efforts around personalization and, to a lesser extent, mobile and rewards, are paying off,” Evercore Partners analyst Ken Sena wrote in a note.

Sena raised his price target on the stock to $17 from $15 and kept a “buy” rating.

Analysts have been particularly concerned that growth was slowing in Groupon’s relatively more mature North American business. However, Groupon said on Monday North America revenue rose 33 percent for the first quarter — the strongest growth in a year.

“Groupon appears to be gaining market share in general,” Benchmark analyst Clayton Moran said.

Groupon’s take rate — which measures how much of the money it keeps after sharing cash with merchants running its deals — rose to 41.3 percent from 40 percent in the previous quarter.

Shares of the Chicago-based company rose $2.55 to 14.29 in trading before the bell on Tuesday. The stock closed at $11.74 on Monday on the Nasdaq.

Coupon generator Groupon acquires Ditto.me social media apps specialist

CHICAGO, Wed April 18, 2012 – E-commerce coupon company Groupon has acquired Ditto.me, a mobile applications specialist providing social recommendations services.

Ditto.me said, without disclosing financial details, that it would terminate its previous services at the end of the month, but did not disclose what its future endeavours would be as part of Groupon. The company will also remove its application from Apple’s and Nokia’s stores.

Ditto’s service, started a year ago, facilitates the discovery through an application for mobile phones of new places such as restaurants and film theaters.

Groupon was established in 2008 and provides a daily offering of deals to its customers. It has approximately 10,000 employees. The company’s headquarters are located in Chicago and has an office Palo Alto, California as well as regional offices in Europe, Latin America, Asia and other territories.

The buyer carried one of the biggest Internet initial public offerings (IPOs) in 2011 which valued the company at $10 billion. Following the revision of its fourth-quarter 2011 results at the end of March this year, the company said that its net loss stood at $65.4 million while its revenue amounted to $492.2 million.

Groupon accounting problems put spotlight on board

NEW YORK, Thu Apr 12, 2012 – Groupon Inc., the online coupon company that floated just months ago in the strongest IPO in years, has had recurring accounting problems that critics say show a need for more financial sophistication on its board.

Groupon revised its fourth-quarter results last month, its first results posted as a public company, trimming revenue by $14.3 million. The company also said it found a material weakness in controls over its financial statements.

Fast-growing Groupon has said the latest accounting problems stemmed from a move into higher priced coupons, which led to more customer returns and refunds than anticipated.

The company sells discounted coupons online, keeping part of the money that customers pay for the coupons, with the rest going to participating merchants.

Groupon has asked an external auditor to look into the causes of its internal control weakness and has said it will beef up its own finance staff.

But corporate governance experts questioned the financial background of the Groupon board’s audit committee, which is supposed to oversee both its auditor and the company’s own accountants.

Groupon spokesman Paul Taaffe said the audit committee has met regularly to address accounting issues since the company discovered in February that the refund rate had increased.

Committee members “were in contact with each other, the audit firm and management continuously,” he said.

Members of the audit committee declined comment.

Groupon buys privately-held startup Hyperpublic

Groupon Inc. has bought location-based technology start-up Hyperpublic Inc, the privately held startup said on its website on Friday.

New York-based Hyperpublic provides data technology to websites that lets users search for restaurants and bars online nearby and post their locations online.

Following the acquisition, Hyperpublic will not provide technology to sites outside of Groupon, Hyperpublic Chief Executive and co-founder Jordan Cooper said on the website.

Terms of the deal were not disclosed.