On Friday, July 19, the newest online coupon business,
), had a significantly successful IPO. The company priced its
initial offering at $21 per share and saw its stock soar 32% over
that mark to $27 per share on that first day of trading. Currently,
the company's stock trades at $27.92.
The company is now the largest digital coupon marketplace in the
world. It has contracts with over 60,000 paid retailers and brands,
and it offers hundreds of thousands of different coupons. What sets
the company apart from its competitors -- such as
) -- is that the vast majority of its coupons are for online sales.
As Jeff Crowe of Norwest Venture Partners, which owns 20.5% of the
company, said in a press release, "RetailMeNot has pioneered this
space, making online coupons as ubiquitous as online shopping
itself." He further added that what initially drew his firm to
invest in the company was RetailMeNot's "early vision to make
online coupons a staple for consumers and merchants alike.
RetailMeNot employs a wide array of digital mediums, including
email newsletters, mobile apps, and a social media presence, to
allow customers to discover and redeem coupons from its extensive
catalog. Often the company's coupons will give consumers a code to
input while online shopping, requiring none of the printing and
barcode scanning of coupons for non-digital goods and services.
The IPO comes at a good time for consumer discretionary companies;
that segment of the
(INDEXSP:.INX) is up 26% year-to-date, higher than the index's
18.37% year-to-date increase. E-commerce represents a small but
significant bit of that growth. In 2012, online retail sales in the
US generated $231 billion, which was 8% of total American retail
sales, and total online retail sales are expected to increase by
13% to $262 billion in 2013. Moreover, the research firm Forrester
expects e-commerce sales to outpace brick-and-mortar sales over the
next five years, with total online sales reaching $370 billion in
Like Groupon before it, RetailMeNot has shown rapid growth, with
revenue rising 37% to $40.6 million in the first quarter of 2013.
During 2012, RetailMeNot drew, on average, 24.2 million unique
monthly visitors to its site. In total, it had 450 million visits
to its site in 2012. Its 2012 revenue was $144.7 million, which
made for a compound annual growth rate of 193%. Also worth
mentioning is the insider trading activity at the company: 27
insider purchases were filed with the SEC on July 24, including
a major purchase
by JPMorgan Investment Management Inc, a beneficial owner of the
But also just like Groupon, RetailMeNot is subject to the same
debate over whether or not coupons are helpful or ultimately
harmful. Tim Engle, the Chief Strategy Officer of Jewelry
Television, a company that sells jewelry online and on cable TV in
85 million homes, told the
Wall Street Journal
that his company no longer uses online coupon services like
RetailMeNot. As he said, "We ended up discounting a lot of products
that didn't need to be discounted."
That said, thousands of companies still use RetailMeNot and its
competitors. Kathleen Waugh, a spokesperson for Toys "R" Us Inc.,
Wall Street Journal
, "We've had great success with these sites and consider them an
important part of our overall marketing strategy." Additionally,
she said that RetailMeNot was one of her company's biggest
One of the big questions on investors' minds is whether or not
RetailMeNot will suffer the same fate as Groupon, with its strong
IPO and its subsequent 62% decline in value. That remains to be
seen, but RetailMeNot has some strong assets that will likely help
it grow. The company knows how to make a profit: From 2010 to 2012,
the company's net income jumped from $2.3 million to $26 million.
At the time of its own IPO, Groupon
was not profitable
. Currently, 78% of RetailMeNot's business is domestic, giving
RetailMeNot a lot of growth potential in global markets.
And perhaps most importantly, the company is poised to continue
taking advantage of the current uptrend in mobile use and
engagement with apps and social media presence. In fact, the entire
global mobile commerce market will see huge growth in the coming
years, as the IDC is forecasting it to grow by 36% annually until
2017. (Last year, that market hit $63.4 billion.)
) recent earnings knockout can be largely attributed to growth in
mobile ad revenue, commerce, and engagement. RetailMeNot has the
means to capitalize on that growth as well.
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