Not too long ago, Groupon’s array of daily discounts at local venues was a compelling strategy that spawned imitators, generating revenue as local businesses gained from increased marketing and customer traffic.
But Groupon shares are tanking again tonight in after-hours trading, more than 20 percent or so, after another disappointing earnings report. Fourth-quarter revenue rose to $638.3 million from $492.2 million in the year-ago period, but the company also reported a net loss and an operating loss in the same period.
And Groupon spooked Wall Street further by projecting first-quarter revenue to come in between $560 million and $610 million, way below the $650 million consensus from analysts polled by Thomson Reuters.
Are daily deals overdone or past their peak? Even Groupon itself seems to think so.
The company is diversifying. It provides deals on its site for longer periods, and merchants can tweak their offers up or down to match their needs.
Groupon is letting users search for deals by type and location, creating more of a deals “marketplace” that also offers new physical products (as opposed to an oil change for your car or a soothing massage for your aching back) called Groupon “Goods” — and a new credit card payments processing service.
Groupon also wants to be an operating system for businesses. It launched an iPad-based point-of-sale (POS) service for retailers and restaurants in October. It is integrating payments and inventory management into the POS service. The service is named Breadcrumb, the name of the POS company that Groupon acquired in 2012.
The new inventory management part of the app allows for easy uploading of menu items and inventory count to its iPad terminals.
Breadcrumb integrates with Groupon Payments, an online payment service, that the company claims to be the lowest-cost option for merchants and small businesses accepting credit cards.
Groupon also began to take a smaller cut of revenue on daily deals, sacrificing revenue to attract and keep more small businesses and merchants.
Groupon CEO and founder Andrew Mason said in a post-earnings conference call that the business is growing from the flash of daily deals in consumers’ inboxes. But that now Groupon sees the future as a mix of the deals marketplace, discounts on actual “goods” and credit card payments as “a much bigger business opportunity.”
So are daily deals by email dead? Groupon still asks for your e-mail first thing when you go to its site. So the strategy is not dead, but still finding its footing. Other recent developments point to a reshaping of the digital daily-discounts arena.
Amazon took a huge $169 million writedown on its $175 million investment in LivingSocial. Not much later, LivingSocial laid off 400 employees, or about 10 percent of its workforce.