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To: stockman_scott who wrote (216)1/12/2012 3:35:29 PM
From: Glenn Petersen1 Recommendation  Respond to of 430
Andrew Mason will be on "60 Minutes" this week:

To: stockman_scott who wrote (216)1/25/2012 4:23:04 PM
From: Glenn Petersen1 Recommendation  Respond to of 430
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.

To: stockman_scott who wrote (216)1/27/2012 11:44:58 AM
From: Glenn Petersen1 Recommendation  Respond to of 430
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.

To: stockman_scott who wrote (216)2/1/2012 7:25:59 PM
From: Glenn Petersen2 Recommendations  Respond to of 430
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.

To: stockman_scott who wrote (216)2/7/2012 2:47:56 PM
From: Glenn Petersen1 Recommendation  Respond to of 430
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.

To: stockman_scott who wrote (216)2/17/2012 7:18:02 PM
From: Glenn Petersen1 Recommendation  Respond to of 430
GRPN makes a strategic acquisition:

Groupon Acquires NYC-Based Startup Hyperpublic

Jason Kincaid
February 16, 2012

Groupon has just acquired Hyperpublic, a NYC-based startup that’s spent the last two years building technology related to geo-location and the layers of information — like deals and events — that live on top of it.

Terms of the deal are not being disclosed, but CEO Jordan Cooper describes it as a “huge win for our team and our investors”. He adds that Groupon was after Hyperpublic’s technology — this isn’t a case of it acquiring the team alone.

Cooper, who is also a General Partner at Lerer Ventures, says that a portion of Hyperpublic’s team will be moving out to Groupon’s engineering offices in California, while others will be leaving the company to pursue other ventures post-acquisition. Cooper will continue in his role at Lerer, and he’ll also be assuming a role with Groupon (he says he can’t get into specifics, but that he’ll be spending a lot of time in California as well).

The startup’s developer platform is going to be shut down, with maintenance and support continuing through March 2 2012 — all data will be deleted after that. Developers can find a FAQ on transitioning their data here.

The startup was founded in 2010 by Cooper and Doug Petkanics, who leads the company’s engineering team and helped forge what Cooper describes as a very engineering-focused environment. Hyperpublic raised $1.5 million in 2010 — Cooper says that board members Jordan Levy (Softbank Capital) Ken Lerer (Lerer Ventures) were also instrumental in the company’s development.

Finally, Cooper points out that Hyperpublic — which has more APIs than it does user-facing services — is a decidedly tech-heavy company. Which breaks with the stereotype of NYC startups being more focused on social platforms and media than on building ‘hard’ technology (incidentally, I suspect this stereotype will fade in the next year or so as the NYC tech community continues to grow).

To: stockman_scott who wrote (216)2/23/2012 4:36:09 PM
From: Glenn Petersen1 Recommendation  Respond to of 430
May Day Looms Large For Groupon

Wall Street Journal
December 28,2011

A summer of IPO love risks turning into a winter of shareholder discontent.

Some initially popular initial public offerings from May and June have disappointed. Now, expirations of lockup periods could prove a stumbling block to their recovery. Many of these companies limited their initial share sales in order to support the offering price. The problematic flip side is a relatively large chunk of shares potentially hitting the market now.

Lockups typically expire 180 days after the IPO. The latest example is vacation-rental company HomeAway. It sold nine million shares, or 11% of those outstanding, in its June IPO. Its lockup period expired Monday, when another 18 million shares became eligible for sale. The remaining 54 million shares can be sold starting in February.

True, HomeAway's stock popped 11% on Tuesday, although that could prove a fleeting technical fillip. A high proportion of the free float has been borrowed by short sellers, who may be buying stock to recognize gains after shares fell 42% the prior two months. The stock remains 19% below its initial price.

Much-hyped LinkedIn's shares have fallen 11% since its lockup ended in late November. The potential float roughly doubled to 18 million shares, about a fifth of those outstanding. And 56 million more shares should be eligible for sale starting in February when an extended lockup agreement expires.

Meanwhile, Pandora Media saw its potential float increase by a factor of nearly nine earlier this month when its lockup expired. Shares haven't reacted much, perhaps because they've already fallen nearly 40% below their IPO price.

Looking ahead, Groupon and Zynga shareholders have lockups expiring on May 1 and May 28, respectively. Shareholders, already suffering lackluster performance, will have to mark their calendars.

Write to Rolfe Winkler at

To: stockman_scott who wrote (216)3/8/2012 9:30:34 AM
From: Glenn Petersen1 Recommendation  Respond to of 430
Some good news for GRPN:

Daily deals inspiring repeat business, study finds

By Jennifer Van Grove
March 5, 2012 2:09 PM

Daily deal providers such as Groupon and LivingSocial are often criticized for driving low-quality business to merchants, but these young companies may, in fact, be purveyors of loyal customers.

Ninety-one percent of web shoppers who redeemed a deal said they have gone on to — or plan to go on to — buy again with the merchant in question, according to customer experience analytics firm ForeSee.

ForSee fielded an online survey between November and December 2011 as a follow-up to its spring 2011 study. The study, which includes survey responses from nearly 10,000 visitors to top retail websites, found that deal buyers are far more likely than expected to turn into repeat customers — a mere 3 percent said they don’t plan to make a repeat purchase from the merchant deal provider.

The findings should come as good news for the newly public Groupon, which continues to face criticism around its business model.

Groupon, according to ForeSee’s data, is also showing a slight upward trend in its purchase rate. Fifty percent of respondents said they purchased an offer from Groupon in the previous 90 days, a 3 percent bump from spring 2011. The deals juggernaut also has the largest share of subscribers who exclusively subscribe to deals from Groupon. Forty-four percent of Groupon subscribers only use Groupon services, while just 12 percent of LivingSocial subscribers are exclusive to its site.

The ForeSee study did uncover one troubling tidbit for the entire industry: daily deals subscriptions are down. The research company found that 60 percent of visitors to top retail websites enrolled in at least one daily deal email program during the holiday season, which represents a five percent dip in subscribers from the spring.

Photo credit: Groupon/Flickr

To: stockman_scott who wrote (216)3/11/2012 11:12:22 AM
From: Glenn Petersen1 Recommendation  Respond to of 430
When Today’s Deal Is Tomorrow’s Regret

New York Times
March 9, 2012

HOW much is a $150 coupon worth? For Matt Sumell, the cost turned out to be one new relationship, as well as a little bit of pride.

In January 2011, Mr. Sumell bought a $150 coupon for a romantic overnight stay in a hotel from LivingSocial, the daily deal site (a savings of about 50 percent). He planned to use it with a woman he had been dating for five years, until that relationship ended.

But Mr. Sumell, an English teacher and fiction writer from Los Angeles, is not one to throw away money. So 11 months later, with the coupon unused and an expiration date looming, he set aside his better judgment and invited a woman he had been dating for only a month.

“I said to her, ‘Come with me, we’ll take a ride,’ ” Mr. Sumell recalled. “ ‘It’ll be great.’ ”

It was not great.

“The hotel was directly across the street from a Hooters,” he said, “and it was bikers’ week,” meaning the hotel was overrun with growling motorcycles and middle-aged men wearing leather. Ambience aside, the sleepover seemed rushed and uncomfortable. “The whole thing was just really awkward,” he said.

So it goes for those people who lately find their leisure activities dictated less by their own free will than by the opt-in domination of daily deal sites. While the rapid spread of services like Groupon, LivingSocial and Amazon Local has allowed millions to try restaurants or leisure activities they otherwise couldn’t afford (or wouldn’t have known about), it is also compelling some people to spend time doing things they don’t necessarily want to do.

For some, it’s eating dinner in a restaurant they already know they don’t like. For others, it’s taking classes that promise “You can learn to salsa” despite a lifetime of evidence to the contrary.

For Karen Eddinger, a real estate agent in Seattle, it meant signing up for a local cooking class even though she hates cooking almost as much as she hates taking classes.

“I really don’t know why I bought it,” she said.

She also recently made her grandson visit the Seattle Children’s Museum for the second time since October not because he liked it, but because she and her ex-husband had unknowingly bought the same Groupon deal. Her daughter and son-in-law have lately attended a number of yoga classes, massages and bad restaurants in an effort to use up their mother’s coupons. (For those without family members willing to help, a secondary market for digital coupons has emerged. Sites like DealsGoRound and CoupRecoup let people sell their unwanted coupons at a discount.)

Coupons are nothing new, and shoppers have long made poor decisions in pursuit of saving pennies. But daily deal sites have raised the stakes in convenience (they arrive via e-mail and are bought with a click), savings (half-off deals to upscale establishments are common) and experiences (Want to hang glide? There’s a Groupon for that).

Hence a new generation is discovering the hidden downsides of couponing. “A deal sometimes feels like a really wonderful thing, like you’ve outsmarted the system and have something special,” said Dan Ariely, the author of “Predictably Irrational,” a book about how a skewed perception of economics can result in poor decisions. “Because of that, you have an extra sense of accomplishment, which you are willing to pay for in terms of time and money.”

But that perspective can mean a bid to save money can quickly devolve into a boondoggle. Lindsay Hall Harrison, a lawyer from Orlando, Fla., bought a $6 Groupon for $12 worth of ice cream from a shop near a beach that she and her husband had visited a couple of times. The problem: the beach was an hour and a half away, and the Harrisons weren’t always in the mood for ice cream by the time they drove there.

“We started making deliberate trips down there just to use up this Groupon,” she said. “It was the principle of the thing.” In the end, she estimated that the couple burned through two to three tanks of gasoline to claim $12 in ice cream, which, she noted, was not particularly great.

Jamie Roo, a marketing director from the Upper West Side, last year found herself eating in a nearby restaurant that she and her husband had long ago decided they didn’t like, because she couldn’t resist a deal from Amazon Local.

“We somehow persuaded ourselves to go back,” she said. Not surprisingly, the deal did not make the food taste any better. “The moral of the story is, don’t go just because it’s a deal.”

The idea that all of one’s leisure-time decisions can be outsourced to daily deal sites is encouraged by the sites themselves. In 2010, Groupon recruited Josh Stevens, a former Census worker from Chicago, to live on nothing but its own deals for a year. The company called Mr. Stevens the Groupawn. Mr. Stevens’s real-life counterparts can be found in Kimberly and Stephen Kuhn, who recently moved to Trinity, Fla., from Miami. Before the move, Ms. Kuhn was a self-described LivingSocial “near-addict,” who would use up to a dozen coupons a week, not to save money, but to decide where to eat.

“In Miami, there are all these great mom-and-pop places you would never know about because they don’t have money to advertise,” said Ms. Kuhn, who gives credit to her local LivingSocial representative (whom she has met) for having her finger on the pulse of the city.

The Kuhns set a one-day record for themselves in June when they realized they had a backlog of coupons to use before they left Miami. “My husband took the day off work and we used seven deals in one day,” all for restaurants, Ms. Kuhn said. “We started at the very tip of north Broward County and worked our way all the way down to South Beach. It was a really great way to say goodbye to the area.”

Thus far, Ms. Kuhn said, she is disappointed with the quality of the deals in Trinity, which tend to feature chain restaurants.

“It’s funny, because I never considered myself a deal addict,” she said. “I’m not a couponer, I don’t do Sunday sales. We really just used it as a tour guide, so we are missing it for sure.”

But that hasn’t stopped her from buying the deals she likes, even if they require some travel. “My husband still works out of Fort Lauderdale, so we still buy those LivingSocials,” she said. “We’ll go back.”

To: stockman_scott who wrote (216)3/15/2012 7:02:00 AM
From: Glenn Petersen2 Recommendations  Respond to of 430
Competition from a very savvy source:

A Groupon Alternative Aims to Offer Small Businesses a Better Deal

New York Times
March 14, 2012

Constant Contact has been one of the big success stories when it comes to online companies that specialize in serving small businesses. Some half a million of them count on the company’s Web-based help in building, managing and creating marketing campaigns around customer e-mail lists.

Started 14 years ago, the company, which is based in Waltham, Mass., went public in 2007 and has expanded into other areas, including managing social-network marketing campaigns. In February, it introduced yet another service: coupon-based deal marketing. That brings Constant Contact into a crowded field of competition along with Groupon and LivingSocial. In a recent interview, condensed below, Gail F. Goodman, Constant Contact’s chief executive, explained why she thinks small businesses will prefer her company’s service.

Q. A lot of consumers are already burned out on deals. Are you too late?

A. We think of SaveLocal as building on the consumer experience that the daily deal companies have demonstrated. Their model has been about large-scale consumer lists, but we saw a while ago that it wasn’t perfectly serving our customer base of small businesses, 70 percent of which have fewer than 10 employees. We started talking to our customers about what did and didn’t work for them with Groupon and LivingSocial. We knew there had to be a better way, but it took us until the beginning of last summer to come up with what we thought would be a twist on the model that would make coupons work.

Then we spent six months developing and testing it to make sure we had it right. We think the timing is actually pretty good, because the merchant community has had a chance to become aware of the issues and problems with the daily deal market, and they’ve become very open-minded to the idea of structuring deals in a different way.

Q. What’s different about your model?

A. If Groupon provides quantity, we want to provide quality. We think the way to find your next great customer is through your existing customers, rather than through a big list of consumers who don’t know much about you. SaveLocal is about sending coupons to your current customer base, and providing them with an incentive to share the coupons with their social network in order to bring in new customers. We also turn the economics of the deal on its head, by letting the merchant control the amount of the discount so they’re not losing money on it.

What’s the incentive for a small business’s customers to share a deal with their social network?

A. The small business chooses the incentive. The reward might be an extra $5 discount on the coupon, or 20 percent off on a second visit, or a free item, or whatever the business wants to offer. But the biggest difference with SaveLocal is that the customer gets the reward just for sharing, whether or not the friends buy anything.

Q. By offering smaller discounts, your merchants may protect per-customer profits, but won’t the deals be less compelling to consumers?

A. We’re seeing success with discounts of less than half off. We haven’t tested it enough to know exactly at what point you get diminishing returns from decreasing the discount, but we’ve seen a customer be wildly successful with a 33 percent discount. A smaller discount might not attract as many customers, but it’s the rabid deal-seekers who are going to find it less appealing, and that’s not necessarily who small businesses want to attract.

We’re changing the whole economics of the deal. The daily deal companies not only make merchants offer about half off, they keep about half of what the merchant takes in on the deal. We only charge $1 to $3 for each coupon. And we help our customers think through the best way to structure the deal. Restaurants can offer a coupon for less than the average ticket and make more when the customer buys up, so that if customers spend $40 on a dinner, the merchant can offer a $20 coupon for $10, and keep all of the extra $20 that the customer spends.

Q. If your customers e-mail their offerings only to existing customers, are they giving up the opportunity to attract lots of new customers?

A. About a fifth of the people responding to our deals are new customers for the merchant. But more important, because they’re getting the offer through an existing customer, they’re much more likely to be local than the people who respond to daily deals, and they’re much more likely to turn into loyal customers. They’re learning about the deal from an existing customer who’s endorsing the merchant. And we give merchants the means for following up, by helping the merchant get the new customer’s e-mail address and opt-in permission during the purchase process. Groupon and LivingSocial don’t share contact information with merchants.

Q. Why can’t a small business send out its own coupons to its own mailing list? Why does it need you?

A. We make it easier and help them structure and manage the deal. We handle the redemption, and we gather and analyze the data, so the merchant can understand the true R.O.I. of the deal based on how much customers spent and how much of it was discounted. And we make it ridiculously affordable.

Q. How do you calculate the return on investment?

A. We think about R.O.I. in two stages. First, the small business wants to know if it made money just on the purchases made by both existing and new customers when they use the coupons, and we track all that to tell our customers exactly how much was spent on the total purchase versus what the business spent on the promotion.

Then we look at the longer-term R.O.I. by tracking how many new customers were brought in and whether they’re being turned into loyal repeat customers by collecting their e-mail addresses with permission for the small business to contact them. We’ll continue to track that longer-term R.O.I. and help our customers take advantage of it with e-mail campaigns.

From the deals that have been done with SaveLocal so far, we’ve seen a good R.O.I. just on the first stage, and now we’re starting to see it on the second stage.

[You can read about a business that tried SaveLocal and one that chose not to at]

Q. Not all businesses have their customers’ e-mails. Can this work for a business that hasn’t been collecting e-mails?

A. Certainly it wouldn’t be starting from as strong a point as a business that has the e-mail addresses, but yes, a small business can start off SaveLocal through sharing over a social network. We believe it’s important that every small business build that e-mail list, and these offers create a great incentive for customers to get on it.

Q. How is your core business of e-mail-based marketing holding up? Is it being replaced by social-media marketing?

A. We do help customers with social-network campaigns, but e-mail is still one of the fundamental channels of communication. Facebook just released the statistic that on average only 12 percent of the people that “like” a page see a new message from the page owner show up in their news feed. The typical small business only has about 100 people who like their page, which means a total of 12 people are seeing the message. The typical small business has more than 2,000 names on an e-mail list. It wouldn’t be smart to stop communicating to those 2,000 people in order to focus on the 100 people they might be able to reach on Facebook.

To: stockman_scott who wrote (216)3/30/2012 5:32:53 PM
From: Glenn Petersen1 Recommendation  Respond to of 430
Groupon screws the pooch:

Groupon slashes 4th quarter results, shares dive

Fri Mar 30, 2012 5:12pm EDT

(Reuters) - Groupon Inc ( GRPN.O) pared back revenue and net income for the fourth quarter, blaming higher refunds on deals for the sharp downward revision in its previously reported numbers.

The company's shares plunged more than 10 percent in afterhours trading.

The largest daily deals company said net income for the fourth quarter was reduced by $22.6 million, while revenue was $14.3 million lower.

"The revisions are primarily related to an increase to the company's refund reserve accrual to reflect a shift in the company's fourth quarter deal mix and higher price point offers, which have higher refund rates," it said in statement.

The company's shares were down to $16.59 in afterhours trading from a close of $18.38 on the Nasdaq.

(Reporting by Edwin Chan; editing by Andre Grenon)

To: stockman_scott who wrote (216)3/30/2012 6:37:58 PM
From: Glenn Petersen1 Recommendation  Respond to of 430
The 10-K:

More details:

Restating Earnings, Groupon Discloses Accounting Issues

New York Times
March 30, 2012, 5:55 pm

restated its fourth-quarter earnings on Friday, widening its loss to $64.9 million after disclosing material weaknesses in its internal accounting controls.

The online coupon company said that its net loss grew in the quarter by $22.6 million, as the company recorded a reduction in revenue and a rise in its operating loss. It also included a disclosure of a material weakness in its annual report.

It is the latest blow to Groupon tied to its accounting, after the fast-growing deal site was forced to amend its financial information several times before going public last year.

Driving the recent accounting change was a need to increase the company’s reserves for refunds. The deals site said that it has been adding a number of higher-priced deal offerings, like laser eye surgery, that bore a higher rate of refunds. Depending on whether such refunds fell within 60 days of buying a coupon, the company would record either a reduction in revenue or would take an additional accounting charge.

Groupon said that the incident highlighted serious issues with its accounting controls, reducing the reliability of its financial statements. “We did not maintain effective controls to provide reasonable assurance that accounts were complete and accurate and agreed to detailed support,” the company said in its annual report.

Shares of Groupon were down more than 6 percent in after hours trading.

The issue arose as the company’s auditors at Ernst & Young pored through Groupon’s financial statements for the year.

Groupon sought to assure investors that the problem is contained, saying that other performance measures, like cash flow, remain unchanged. The company also said that it reaffirmed its earnings guidance for the first quarter of this year, including an expectation of $510 to $550 million in revenue and $15 million to $35 million in operating income.

“We remain confident in the fundamentals of our business, as our performance continues to highlight the value that we provide to customers and merchants,” Jason Child, Groupon’s chief financial officer, said in a statement.

To: stockman_scott who wrote (216)4/2/2012 9:07:22 PM
From: Glenn Petersen1 Recommendation  Read Replies (3) | Respond to of 430
SEC Probes Groupon

Wall Street Journal
Updated April 2, 2012, 8:18 p.m. ET

The Securities and Exchange Commission is examining Groupon Inc.'s GRPN -16.89%revision of its first set of financial results as a public company, according to a person familiar with the situation.

The regulator's probe into the popular online-coupon company is at a preliminary stage and the SEC hasn't yet decided whether to launch a formal investigation into the matter, the person said.

The SEC decision to examine the circumstances surrounding Groupon's surprise revision is the start-up's latest run-in with the regulator. Groupon twice revised its finances before its November IPO. An SEC spokesperson declined to comment, as did a spokesman for Groupon.

Groupon shares plunged Monday, ending the day down nearly 17% at $15.27, far below its $20 IPO price. The selloff came despite damage control efforts by Groupon's top two executives, Chief Executive Andrew Mason and finance chief Jason Child.

The Chicago company also closed ranks around Mr. Child, even as accounting experts and investors criticized his performance. People familiar with the situation said Mr. Child, who joined Groupon from Inc. in December 2010, continues to have the support of Mr. Mason and others at the company.

Groupon said Friday it was revising its results for the fourth quarter after discovering executives had failed to set aside enough money for customer refunds. The company had reported a loss of $37 million for its fourth quarter. The accounting changes reduced the company's revenue for the quarter by $14.3 million and widened its loss by $22.6 million.

The revision came after an unsettling discovery in late February. That's when Groupon's chief accounting officer told Messrs. Mason and Child that many customers had returned their coupons in January, said a person familiar with the matter.

What's worse: the four-year-old company didn't have enough money set aside in its reserves to cover those refunds, according to this person.

The duo questioned whether this meant people weren't interested in buying daily deals anymore, according to this person: "It made [the executives] think there's got to be something [they] don't understand. A business just doesn't go sideways and go in another direction overnight."

Ultimately both men got comfortable after an internal analysis found only certain types of coupons were being returned, this person said.

The moment of crisis illustrates how deep the growing pains are at Groupon as it comes to grips with its status as a newly public Web company. In addition to revising its quarterly results, the company on Friday revealed a "material weakness in its internal controls."

According to people familiar with the situation, Groupon expects to address the material weakness by the time it reports its first-quarter earnings on May 14.

Groupon has also hired a second accounting firm, KPMG, in addition to its current accountant Ernst & Young. KPMG's role is to make Groupon compliant with Sarbanes-Oxley, federal regulations around accounting and disclosures of public companies. In addition, Groupon plans to hire more accounting and finance staff, said a person familiar with the matter.

The revision threw open the question of "whether there is any real corporate governance at Groupon whatsoever," wrote professors Anthony Catanach of Villanova University and Ed Ketz of Penn State University on their Grumpy Old Accountants blog.

Others fingered Groupon's fast growth—its revenue was $1.62 billion last year, up from $14.5 million in 2009—as the culprit for its recent mishaps. Groupon previously had to change its accounting twice before its IPO in response to SEC concerns.

"I view this as growing pains," said one Groupon investor who declined to be named. "This is like a high school kid who is a five-foot sophomore and becomes seven feet by the time he's a senior."

At the heart of Groupon's most recent problem is something known as the "Groupon Promise" which allows customers to return one of its coupons. The company has no plans to change its policy, said a person familiar with the matter, since it uses it to compete with rivals like LivingSocial Inc.

But that policy led to a meeting in late February between Mr. Child and his chief accounting officer Joe Del Preto, just a few weeks after Groupon had reported its first earnings report as a public company.

For the month of January, Mr. Del Preto told Mr. Child the number of refunds had exceeded all previous models Groupon had built to predict its customers' behavior, said a person familiar with the matter.

Mr. Child had his team build a model that took into various factors as to why people were returning Groupons, according to a person familiar with the matter. What he discovered was the refunds were highly correlated to the higher price point deals—such as high-priced deals like Lasik eye-surgery—which the company had only begun offering last year.

Executives decided to hold off on filing their annual 10K financial report with the SEC until they could sort out what was going on, said this person. The deadline for the 10K was Friday, which is why Groupon filed at the last minute with the revision, this person added.

—Vipal Monga and Maxwell Murphy contributed to this article. Write to Shayndi Raice at and Jean Eaglesham at

To: stockman_scott who wrote (216)5/7/2012 4:19:13 PM
From: Glenn Petersen1 Recommendation  Respond to of 430
Damage control:

Groupon stock rebounds on letter from CEO Mason

By Wailin Wong
Tribune reporter
11:00 AM CDT, May 7, 2012

Shares of Groupon were on the rise Monday, rebounding from weeks of declines as the company released an upbeat letter to stockholders from co-founder and Chief Executive Andrew Mason.

Shares were up 5 percent, or 50 cents, to $10.47. The letter, filed with the Securities and Exchange Commission as part of the company's annual report, acknowledged Groupon's troubles since going public in November and outlined its vision for becoming "the operating system for local commerce."

"Though the six months since our IPO have been rocky to say the least, the fundamentals of our business have continued to improve," Mason wrote.

In late March, Groupon disclosed a "material weakness" in its internal controls and restated fourth-quarter and full-year revenues, showing a decline in those figures. The company said it had underestimated the amount of money it needed to set aside for customer refunds. The disclosure sent Groupon's shares into a freefall. On Friday, the stock closed below $10 for the first time, marking a 45 percent drop since the revenue restatement.

Even with Monday's bounce, Groupon's shares have much ground to make up before returning to their $20 IPO price. Recent announcements, including the hiring of new senior executives and the replacement of two board members, had failed to stem the declines. The company's first-quarter earnings, scheduled to May 14, also pose an important confidence-testing event for investors.

Mason's letter provided broad strokes of how the company is seeking to transform itself into a technology-driven business whose products and services will "profoundly change the way we shop locally." Groupon critics have been dismissive of the company's technology pedigree from its inception, seeing it as a low-tech marketing play -- or, as Mason worded it in his letter, "a glorified mailing list."

"Today, Groupon is a marketing tool that connects consumers and merchants," Mason said. "Tomorrow, we aim to move upstream and serve as the entry point for local transactions."

Groupon's main engineering office is in Palo Alto, Calif., though it has tech staff in Chicago and Berlin. The company has made nearly a dozen acquisitions in the last year to absorb additional high-tech talent, and it's introduced products such as an online scheduling tool for merchants and a deal personalization algorithm. Groupon is also encouraging its members to purchase deals on their mobile devices. In April, nearly 30 percent of transactions in North America were done on mobile devices, compared with 25 percent at the beginning of the year. | Twitter @VelocityWong

Copyright © 2012, Chicago Tribune

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