Groupon aims to be “OS of local commerce”

Tapping into a "multi-trillion dollar ecosystem"

Groupon is aiming to become the operating system of local commerce, according to the firm’s CEO, Andrew Mason, as the daily deals company attempts to reassure investors of its long-term viability. In a letter to investors, Mason claims that the internet is yet to revolutionise local commerce as it has done for markets such as media and entertainment, and he remains bullish about Groupon’s prospects in the coming months despite conceding that its first six since its USD700 million IPO were “rocky to say the least”. Mason says that Groupon is developing a platform for local commerce as it attempts to tap into what he describes as a “multi-trillion dollar ecosystem”, hinting that the company is set to move beyond simply offering daily deals to consumers.

While Mason’s letter reveals that Groupon sold 170 million deals to 33 million customers in 2011, he says that more than 10 million consumers that are yet to make a purchase engage with Groupon every month, indicating the challenges still facing the firm as it attempts to convert browsers into purchasers. The stat echoes comments by Mason last month where he claims that Groupon’s inactive users represent a potential USD400 million in annual revenue. The firm defines active users as consumers that have purchased at least one deal within the last year.

Mason believes that greater deal personalisation, such as deal emails sent using Groupon’s SmartDeals algorithm, will drive revenues, and claims that emails implementing SmartDeals in Chicago see purchase rates 50% higher. Mason says Groupon plans to roll out SmartDeals worldwide by the end of the year. Mobile also remains a key area for the firm, with a third of North American transactions in April completed via mobile, according to Mason, spurred by Groupon’s mobile platform, Groupon Now!, which he says recently surpassed 1.5 million purchases.

Groupon came in for waves of criticism both before and after its IPO in November last year, dogged by accounting discrepancies and concerns over its sustainability as a business. Groupon added USD22.6 million to its latest quarterly losses in April, owing to an influx of refunds and a shift to higher price points, fuelling investor and analyst apprehension.

Such concerns are indicative of the wider market, with research by Daily Deal Media claiming that the number of daily deals sites globally fell by 798 in the second half of 2011 alone. However, separate research by ForeSee offers hope for the market, claiming that 91% of the daily deals consumers surveyed were already existing customers of the business, or planned to return.

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