Groupon's main business of emailing daily deals to consumers
is ailing, but some on Wall Street remain upbeat that the
struggling company will grow again with new marketing
) is working to switch to a pull business model -- meaning it
expects customers to visit its website for deals, instead of
sending out emails, known as a push marketing model.
Attracting customers to a site is seen as a tougher, less
in-your-face approach. So Groupon "is witnessing some head
winds," wrote JPMorgan analyst Doug Anmuth.
But Groupon's transition to pull marketing may already be
working for some consumers who are searching the Web for quick
deals. Groupon has noted that "the percentage of same-day deal
redemptions has doubled since the beginning of 2013, suggesting
user behavior is adjusting toward the pull model," wrote
Investors Ponder Possibilities
Wall Street largely is standing on the sidelines, waiting to
see if Groupon can jump-start its growth. Of 24 analysts Thomson
Reuters polled, 14 rate Groupon hold. Nine say it's a buy, and
one calls it underperform. The median price target is 12,
according to Thomson Reuters. Groupon stock traded near 11
Groupon says it has made progress moving advertisers and users
to a pull model. Like rival LivingSocial, partly owned
), most of Groupon's business since its 2008 founding has come
via emails prompting customers to buy a deal. For example, French
restaurant Chez Jacqueline in New York's Greenwich Village has a
$69 dinner-for-two deal (58% off regular price). More than 5,000
Groupon users have bought it.
In September, about 6% of Groupon's traffic came via search
results, the company said in November, as it released Q3 results.
(Q4 results are due Thursday afternoon.)
Those customers who came to Groupon via search results on
average spent 25% more than those who came via other means.
About 75% of Groupon's North American advertisers have signed
up for monthly recurring deals through the new pull program.
The rollout of pull marketing in Q3 created slight pressure on
Groupon's email business, CEO Eric Lefkofsky told analysts in
November. "In the new pull marketplace, customers can wait and
buy deals closer to when they intend to actually use them," he
Groupon might have to compete more directly withGoogle (
), which has seen success with Product Listing Ads in its search
results. The ads usually have photos of products, plus prices at
Still, Groupon's active customer growth slid in the first
three quarters of 2013. The count climbed 10% to 43.5 million in
Q3, vs. 12% Q2 growth and 13% Q1 growth.
In Q3 the average customer spent $137 in the prior 12 months,
down from $138 in Q2. The firm ended 2012 with a customer
spending $144 in the trailing 12 months.
The move into new marketing territory is to be partly fueled
by acquisitions, such as a $43 million Ideeli.com cash buyout
The fashion site has 6 million active users who look for
deals, which analysts see as a positive. "It helps Groupon gain
access to a new category and adds to its top line and, over time,
to its bottom line," wrote Sterne Agee analyst Arvind Bhatia.
Organic Growth Efforts
The company's not relying just on acquisitions. In September
2011 it launched
, a retail site offering products at deep discount. And Feb. 10
it launched a back-end program called Deal Builder that for the
first time lets U.S. advertisers post product deals without
contacting a person.
Adding new ways for advertisers to contact Groupon will
provide customers with deals on "just about anything, anywhere,
anytime," Vice President of Deal Development Dan Roarty said.
Groupon works best for bigger advertisers, says R3
Communications' Rhonda Moret, who formerly used it to market the
Tour Academy, a PGA golf licensee for which she was senior vice
president of marketing .
For a small business with razor-thin margins, having a
customer buy a deal and then not visit the store for months can
be tough to manage. "I think depending on the business and the
sophistication of those running the campaign, the traction and
return can be very good or very poor," Moret said.
For businesses that don't gain traction with a Groupon deal,
there's little incentive to stay, said Mark Aselstine of wine
club Uncorked Ventures: "We learned that customers looking for
discounts are always going to be customers looking for discounts
-- those aren't the type of customers that can help a
As Groupon reinvents itself, it's going through some
executive-level turmoil. Founder and CEO Andrew Mason was forced
out a year ago. This month Groupon disclosed that Senior Vice
President of Product Management Jeff Holden will exit Groupon on
The timing "adds to our existing concerns ," analyst Bhatia
Groupon's 2013 sales are expected to come in up 8%, trailing
their 44% 2012 growth, according to Thomson Reuters. And 2013
per-share profit ex items is seen at 9 cents, down 31%. But
analyst consensus for 2014 points to a brighter future. Sales are
expected to climb 15% to $2.9 billion, while EPS is seen leaping
178% to 25 cents.