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To: Glenn Petersen who wrote (205)12/14/2011 4:03:01 PM
From: stockman_scott
   of 462
William Blair Analysts Now Covering Groupon (GRPN) Stock

Equities research analysts at William Blair initiated coverage on shares of Groupon (NASDAQ: GRPN) in a research note issued to investors on Wednesday. They set an “outperform” rating on the stock.

Separately, analysts at Credit Suisse (NYSE: CS) initiated coverage on shares of Groupon in a research note to investors on Wednesday. They set a “neutral” rating on the stock. Analysts at Wells Fargo & Co. (NYSE: WFC) initiated coverage on shares of Groupon in a research note to investors on Wednesday. They set an “outperform” rating on the stock. Also, analysts at Barclays Capital (NYSE: BCS) initiated coverage on shares of Groupon in a research note to investors on Wednesday. They set an “overweight” rating on the stock.

Savvy consumers get their coupon on with Groupon. Tapping into the power of collective buying, the company helps businesses attract customers by offering them a unique way to save on things to eat, see, and do in more than 500 markets worldwide. In each participating city, Groupon advertises a daily deal, typically a half-off coupon for anything from a local restaurant or retail store to a hotel or spa; if enough consumers buy the coupon online by midnight, the deal is on and the featured business can achieve a nice chunk in sales. In late 2010, the company rejected a reported $5.3 billion buyout offer from Internet search giant Google. Groupon instead filed to go public in mid-2011.

Shares of Groupon traded down 8.23% during mid-day trading on Wednesday, hitting $21.40. Groupon has a 52 week low of $14.85 and a 52 week high of $31.14. The stock’s 50-day moving average is $21.76 and its 200-day moving average is $21.76. The company has a market cap of $13.65 billion.

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To: Glenn Petersen who wrote (205)12/20/2011 5:58:33 PM
From: stockman_scott
1 Recommendation   of 462
Groupon Really Wants To Build Its Own Data Center, But Can't Afford It

12/19/11 -- Before its IPO, Groupon promised investors that it was going spend more money on data centers.

But its cash flow is brutally tight. Even with the $700 million it raised in its IPO, it doesn't have the cash to build its own data center, says BetaBeat.

The company had $243.9 million in cash and equivalents when September closed, according to the Motley Fool. But it owed merchants $465.6 million.

Building a new state-of-the-art data center could cost as much as $750 million with another $10 million a year needed in upkeep. At least that's how much Apple was said to be spending on its North Carolina facility for the iCloud.

Groupon doesn't necessarily need to build its own data centers to grow -- it has so far mostly rented space from hosting providers and cloud providers like Amazon, like most other fast-growing Internet startups.

Facebook, for instance, just started building its own data centers last year, despite having more than 800 million users, many of whom are uploading photos and videos and sharing content, which requires massive amounts of file storage.

But Groupon is starting to think about it. Whereas the company was famous for growing by renting nearly everything it needed from the cloud, it has started to build its own IT systems from scratch. For instance, It has its own homegrown systems for tracking deals that are analyzed for trends, says ZDnet.

Plus, investing in technology -- particularly data centers -- is one of the areas Groupon promised investors in its IPO prospectus:

We have spent and expect to continue to spend substantial amounts on data centers and equipment and related network infrastructure to handle the traffic on our websites and applications. The operation of these systems is expensive and complex and could result in operational failures. In the event that our subscriber base or the amount of traffic on our websites and applications grows more quickly than anticipated, we may be required to incur significant additional costs.

But does it have the cash it needs to cover "significant additional costs"? Answer for now seems to be, "no."

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To: stockman_scott who wrote (213)12/28/2011 8:54:16 PM
From: Glenn Petersen
1 Recommendation   of 462
Ahead of I.P.O., S.E.C. Pressed Groupon On Accounting

New York Times
December 28, 2011, 7:05 pm

Ahead of Groupon‘s highly anticipated initial public offering in November, the Securities and Exchange Commission repeatedly pressed the daily deals giant to defend its business model and its accounting measures, according to comment letters recently disclosed.

The letters, sent by the S.E.C. between June 29 and October 3, provide an interesting window into the back-and-forth discussions between the Internet company and its regulators in the months leading up to its I.P.O. In the letters, the S.E.C. seemed somewhat skeptical of Groupon’s business model and called on the company to balance its bullish statements with additional disclosures. Regulators also asked Groupon to address comments made by executives during the so-called quiet period, which seemed to defy S.E.C. rules.

Shares of Groupon slipped nearly 2 percent on Wednesday to close at $22.62 per share.

In the first letter, dated June 29, the S.E.C. outlines 73 comments, spanning 14 pages. Among the comments, regulators called on Groupon to list specific risk factors for its international operations, provide additional data on consumer attrition and repeat merchants, and to temper certain statements about the company’s growth prospects. In one section, for instance, the regulators advise the company to re-frame a comment made by chief executive Andrew Mason that “‘Groupon is better positioned that any company in history to reshape local commerce’ by noting the company’s net losses and competitive landscape.”

In response to another statement made by Mr. Mason, that “our customers and merchants are all we care about.” The regulators reminded Groupon of its responsibility to its investors:

“Please balance the statements regarding the premise that your customers and merchants are all you care about with a discussion of your fiduciary duty to shareholders.”

As evident in the letters, the S.E.C. spent a lot of time parsing the statements of Groupon’s executives on and off the prospectus. In its first comment letter, regulators called on the company to address a Bloomberg News interview, during which co-founder Eric Lefkofsky said the not-yet-profitable Groupon was going to be “wildly profitable.” Several months later, the S.E.C. also asked the company to provide the full text of an internal e-mail sent by Mr. Mason, which was somehow leaked to the press.

Notably, the S.E.C. was particularly clear about its reservations on Acsoi, or adjusted consolidated segment operating income, an uncommon financial yardstick Groupon introduced in its first filing. In the June 29 letter, the S.E.C. said Acsoi — which is essentially operating profit stripped of marketing and acquisition costs — was somewhat misleading to prospective investors:

It appears that online marketing expense is a normal, recurring operating cash expenditure of the company. Your removal of this item from your results of operations creates a non-GAAP measure that is potentially misleading to readers. Please revise your non-GAAP measure accordingly.

The exchange between the S.E.C and Groupon, reveal the company’s initial resistance. In a July 14 letter to the S.E.C., the company tried to defend its math, arguing that Acsoi does include some expenses related to marketing for existing subscribers. The S.E.C. was not swayed, and in a subsequent letter, simply asked for its removal. On October 10, Groupon complied in a revised filing.

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To: Glenn Petersen who wrote (214)12/29/2011 4:21:24 PM
From: stockman_scott
1 Recommendation   of 462
Groupon Acquires Stealth Silicon Valley Startup Campfire Labs

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To: Glenn Petersen who wrote (214)1/3/2012 3:38:31 PM
From: stockman_scott
1 Recommendation   of 462
Groupon Shares Fall on Merchant Concerns

January 3rd, 2012 - (Reuters) - Groupon Inc shares fell more than 7 percent on Tuesday on concern the company may not have as many daily deals to offer as some merchants pull back. Susquehanna Financial Group and daily deal industry tracking firm Yipit surveyed almost 400 merchants recently about their experiences running daily deals with Groupon, LivingSocial and other providers.

An average of 8 out of 10 merchants enjoyed working with daily deal companies, the survey found.

However, it also found that 52 percent of the surveyed merchants are currently not planning to feature deals in the next six months. Nearly 24 percent of the merchants intend to feature only one deal in the next six months, the poll also found.

Groupon shares were down 7.4 percent at $19.10 during afternoon trading on Tuesday, below the company’s initial public offering price of $20.

Last year, Groupon completed one of the largest Internet IPOs since Google’s debut, but the Chicago-based company’s business model has been questioned by some analysts.

A crucial part of the company’s business involves persuading merchants to run deals and accept the large discounts that are integral to the offers.

“Our proprietary merchant survey highlights concerns of the daily deal sites and early read implies lower usage over the next six months, despite some surprisingly high satisfaction rates,” Herman Leung, an analyst at Susquehanna, wrote in a research note detailing the survey results.

Groupon and LivingSocial recently unveiled instant deals, which are location-based offers that are usually run by merchants for a few hours only.

The survey by Susquehanna and Yipit found that only 10 percent of merchants polled have considered running an instant deal with Groupon or LivingSocial.

(Reporting by Alistair Barr, editing by Dave Zimmerman)

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To: stockman_scott who wrote (216)1/12/2012 3:35:29 PM
From: Glenn Petersen
1 Recommendation   of 462
Andrew Mason will be on "60 Minutes" this week:

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To: stockman_scott who wrote (216)1/25/2012 4:23:04 PM
From: Glenn Petersen
1 Recommendation   of 462
Potential competition from an unlikely source:

Bank of America Looks To Enter Daily Deal World By David Benoit

Wall Street Journal
January 25, 2012, 3:26 PM
Look out Groupon, Bank of America wants to be the latest daily-deal company.

The bank is going to be testing a service with employees that offers what amount to coupons to holders of BofA credit and debit cards, colleague Andrew R. Johnson reports.

This is one attempt by giant banks to tap into the piles of data they have on their customers and turn it into a revenue stream. BofA would target the deals by mining what a customer typically purchases. The discount from the deal, if used, would show up as cash-back on the customer’s card at the end of the month.

That kind of targeting could give the bank a big advantage from mass-email lists of deals like Groupon.

But it remains to be seen if the BankAmeriDeals program, which is what they’ve decided to dub this, will be viewed positively by customers who still seem angry about the $5 fee the bank planned to charge them for using debit cards, even though the charge was never implemented.

There’s no word if one of the deals would be for a $5 refund on bank fees.

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To: stockman_scott who wrote (216)1/27/2012 11:44:58 AM
From: Glenn Petersen
1 Recommendation   of 462
A two horse race:

LivingSocial Now At 5,000 Employees, Half The Size Of Groupon

Erick Schonfeld
January 27, 2012

A few days ago, at the DLD conference, Groupon CEO Andrew Mason revealed that his three-year-old daily deal company now has 10,000 employees, with about 70 percent overseas. What about LivingSocial, the No. 2 daily deal company? Tim O’Shaughnessy told me yesterday the company is now at 5,000 employees worldwide, with “just under half” in the U.S.

While he won’t reveal LivingSocial’s revenues (the company is still private, and just raised another $176 million in December), he says: “We’ve grown very significantly in the last 12 months. We entered 2011 with 3 countries,, now we are at more than 20, with 60 million members worldwide, and just around 5,000 employees worldwide. We have been able to aggressively grow the business.”

But what about all of the Groupon and LivingSocial clones dropping like flies? Is the daily deal business winners-take-all, with Groupon and LivingSocial emerging victorious, or is the whole industry in trouble? One recent study, estimates that 798 daily deal clones hit the deadpool in the last 6 months alone. ”A lot of people started to scale and started to realize they didn’t have all the pieces needed to make it work,” says O’Shaughnessy.

The bigger question is whether the whole industry’s moment in the sun has passed. After all, the daily deal business was born in the worst recession since the Great Depression when deals were especially appealing. Now there is deal fatigue, and the economy isn’t in as dire straights. O’Shaughnessy doesn’t see it that way. “The business is not predicated on being in a recessionary cycle,” he argues, pointing to its success in countries like Brazil whose economies are doing well.

Okay, but what about the fact that traffic to LivingSocial has dropped significantly since last summer? In the daily deals business, historically, at least, there was a strong correlation between traffic and transactions. According to comScore, visitors to LivingSocial’s site peaked last June at 11.2 million worldwide. In December it was down to 4.4 million. Groupon also took a hit, peaking at 14.4 million worldwide unique visitors in June, but it’s been growing steadily since September and was back up to 12.5 million uniques in December. (See chart above).

There is another factor to consider here, however. “Everybody knows,” says O’Shaughnessy, “a lot of marketing has gone into this space. Guess what? When you click on an ad and you are taken to a page, that is traffic. Once you get enough users, if you stop doing some of that marketing, you will have a significant drop in traffic.” The daily deal companies were paying through the nose for traffic. It certainly showed up in Groupon’s numbers. And LivingSocial was doing the same thing. We’ll find out when Groupon announces its first earnings quarter, how much it is continuing to spend on marketing, but LivingSocial has pared back and is now focussed on harvesting the 60 million users it already has a relationship with. Also, these numbers don’t measure mobile, which is “an incredibly meaningful percentage of interaction,” notes O’Shaughnessy.

The one thing I took away from my conversation with him is that you can’t be too simplistic in your analysis of these businesses. Not every customer is the same either. the 60 millionth customer does not behave the same way as the 1 millionth, and mobile app users are much more engaged. It is important to look at cohorts of customers (people who joined a year ago versus 6 months ago), and see if older customers are becoming more loyal.

Most importantly, he sees the daily deal business as we know it today merely as an entry point for local commerce. It is version 1.0, and he is already building version 2.0, which could make LivingSocial end up looking significantly different from Groupon down the road. I will delve deeper into where LivingSocial might be headed in another post.

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To: stockman_scott who wrote (216)2/1/2012 7:25:59 PM
From: Glenn Petersen
2 Recommendations   of 462
Amazon filing shows $558M loss for LivingSocial in 2011

by Todd Bishop
February 1, 2012 at 8:31 am

How much does it cost to bulk up and compete with the likes of Groupon in the daily deals market?’s annual Form 10-K filing, made public this morning, reveals detailed financial information about LivingSocial, the privately-held Washington, D.C.-based company in which Amazon is an investor.
A footnote in Amazon’s filing gives this condensed statement of operations for LivingSocial in 2011.

  • Revenue: $245 million
  • Operating expense: $686 million
  • Other expense: $117 million
  • Net Loss: $558 million
We were able to track down some additional context: A person familiar with LivingSocial says the revenue would have been significantly higher had it included the company’s full international results for the year, which were boosted in part by a series of overseas acquisitions. In addition, the bottom line was impacted by heavy marketing expenses, as the company sought to grab market share, and those expenses were concentrated heavily at the beginning of last year.

The losses also reflect non-cash items such as stock compensation for employees, as the company grew from 600 employees to 5,000 over the course of the year, and expanded from three international markets to 20. Here’s the Living Social balance sheet as of Dec. 31, as shown in the Amazon filing.

  • Current assets: $156 million
  • Noncurrent assets: $285 million
  • Current liabilities: $225 million
  • Noncurrent liabilities: $21 million
  • Mandatorily redeemable stock: $199 million
Amazon, which originally invested $175 million in LivingSocial in 2010, says the book value of its 31 percent interest in the company was $208 million as of Dec. 31. That was up from a $192 million book value as of Sept. 30, when Amazon put its stake at 32 percent.

Amazon was reportedly among the investors in a follow-on financing round in LivingSocial in December, allowing the daily deals company to hold off on an IPO for the time being.

Groupon, which went public last year, also continues to operate in the red.

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To: stockman_scott who wrote (216)2/7/2012 2:47:56 PM
From: Glenn Petersen
1 Recommendation   of 462
GRPN reports tomorrow. A preview:

Groupon’s Made-Up Holiday to Play Role in First Earnings Report

By David Benoit
W3all Street Journal
February 7, 2012, 1:52 PM

Groupon, one of last year’s most-talked about IPOs, will deliver its first earnings report tomorrow.

The daily-deals company is expected to report a 3 cent per share profit on revenue of $475 million, according to Thomson Reuters. (It is the first time the company has released the data at the end of the quarter, though it did disclose financial data in its pre-IPO filings.)

The stock rallied 15% this year to $23.78 recently, but remains below its highs of over $31 the day it priced, amid concerns about dramatically increased competition.

Here’s what else analysts say to look out for tomorrow.

Citi examines surge in gross billings: Citi analysts predict $1.31 billion in gross billings, tripled the prior year, but slowed dramatically from the quintupling Groupon had been experiencing. Showing the same growth patterns (massive by all accounts except Groupon’s own high bar), Citi believes active customers are Groupon are likely at 31 million, 3.5 times where they were a year earlier.

Raymond James will look for any signs of customer fatigue: Given the slowing growth rates, it matters more if Groupon’s customers are actually buying any Groupons. Raymond James says investors will be focused on consumer engagement metrics, including Groupons sold per active customer.

Morgan Stanley expecting a beat on Groupon’s made up holiday: Morgan Stanley believes Groupon can beat sales expectations, partly thanks to “Grouponicus,” Groupon’s somewhat creepy and made-up commercial holiday that it bases on a legend of Groupo the Deal Bird who travels throughout history bestowing deals upon the people. Outside of that, Morgan Stanley is looking for clarity on what exacting Groupon will report each quarter.

Susquehanna focuses on commissions: The analysts will be watching how much of each sale Groupon is collecting –the take rate. They are also expecting a first-quarter outlook for better top and bottom lines.

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