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Groupon Has ‘Never Been Stronger’ With Revenue Soaring, CEO Says in Memo

Groupon Inc. Chief Executive Officer Andrew Mason said the digital-coupon company is growing and widening its lead over rivals, addressing concerns raised about the business as it prepares for an initial public offering.

“When I read some of the press this weekend, I realized a rational person could read this stuff and wrongly conclude that we’re in trouble,” Mason wrote in a memo sent to employees yesterday that was obtained by Bloomberg News. “The irony is hopefully clear: We’ve never been stronger.”

Groupon forecasts U.S. sales in August will increase about 12 percent over the previous month. Marketing expenses, expected to fall 20 percent this month, will continue to decline as the company shifts its focus from acquiring new subscribers to converting them into paying customers, Mason said in the letter.

The Chicago-based company amended its IPO filing earlier this month, stepping back from a controversial approach to accounting. The U.S. Securities and Exchange Commission was examining the earlier numbers, which relied on adjusted consolidated segment operating income, or adjusted CSOI, a person familiar with the matter said on July 27. Groupon plans to raise $750 million in the IPO.

“The reason everyone in the world seems to hate ACSOI is that it makes us look magically profitable by subtracting a bunch of our customer acquisition marketing costs from our expenses,” Mason said in the memo, first reported by AllThingsDigital. “We think it actually does a pretty good job at describing our marketing expenses in a steady state.”

Market Share

Mason also accused daily coupon rival LivingSocial.com of buying gift certificates from national retailers and reselling them to users “to give the appearance of a 50 percent off deal.” Groupon gained market share at the expense of LivingSocial in July, according to data released yesterday by website Yipit Inc.

LivingSocial said today that Groupon wasn’t privy to its operations.

“No Groupon executives have access to our internal revenue or financial numbers, and thus any claims made by such executives should be met with deep skepticism,” Brendan Lewis, a spokesman for the Washington, D.C.-based company, said in an e-mail.

Internationally, Groupon is improving profitability in every country it operates, Mason said. “Every country is either losing less or making more.”

The company’s joint venture in China recently fired a large number of workers for poor performance, a person with knowledge of the matter said earlier this week.

Groupon Getaways, a service for discounted airfare started last month in partnership with Expedia Inc., generated revenue of $10 million in its first month, according to Mason’s memo.

To contact the reporter on this story: Douglas MacMillan in San Francisco at dmacmillan3@bloomberg.net

To contact the editors responsible for this story: Tom Giles at tgiles5@bloomberg.net

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