Groupon narrows loss to USD11.7 million as it cuts marketing costs

Moving closer to profitability

Surging revenues and declining marketing costs helped Groupon to narrow its Q1 net loss to USD11.7 million, from the USD146.5 million loss it made in the same period last year, as the firm moves closer to profitability. Total revenues for the quarter rose 89% year on year to USD559.3 million, and the firm is expecting Q2 revenues of between USD550 million and USD590 million, up between 40% and 50% compared to a year ago.

The firm is highlighting its “rapid” growth in North America, where revenues grew 75% year on year to reach USD238.6 million. Groupon attributed its US growth to recent tweaks to its deals offering, which enabled more personalised deals. The firm is also looking to build on this growth through 2012 with plans to introduce deal personalisation to the “majority” of the markets where it operates by the end of the year. International growth was also strong, with revenues outside the US more than doubling to hit USD320.8 million. “Groupon is not showing any signs of impact from the European recession,” says Benchmark analyst Clayton Moran. “All in all, it appears like the business continues to have solid growth.”

Groupon also hit a new user milestone, surpassing the 35 million active user mark to reach 36.9 million customers at the end of Q1, up 140% year on year. The firm has previously defined an active user as anyone who has bought a deal in the space of a year, and the higher count suggests that the firm’s recent innovations are paying off. Crucially, the firm says it is managing to win new customers while keeping marketing costs down. Historically, Groupon’s spiralling customer acquisition costs have drawn serious criticism, particularly when it failed to account for these costs in its financial filings. The firm says it cut marketing spend by 25%, while managing to add the same number of new customers as in Q4 2011.

Along with strong user growth, Groupon says it is seeing an uptick in mobile, with almost 30% of transactions among US subscribers taking place on mobile devices. Groupon’s location-based, time-sensitive deals service for mobile, Groupon Now!, is subsequently seeing growth, surpassing 1.5 million deals in the quarter.

Despite a wave of bad press and anecdotes of merchant dissatisfaction, Groupon says that more than 50% of the offers that ran in Q1 were with repeat retailers. The firm served more than 100,000 unique merchants in the quarter, and says it is seeing strong engagement from retailers with its new deals tools, such as its pilot loyalty scheme, Groupon Rewards, and Groupon Scheduler booking tool.

Groupon by the numbers
¤ Net loss narrows to USD11.7 million, from USD146.5 million in Q1 2011.
¤ Quarterly revenues up almost 90% to USD559.3 million.
¤ US revenues rise 75% to USD238.6 million.
¤ Active users reach 36.9 million.
¤ Some 30% of deals taking place on mobile.

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