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Groupon Says It Plans to ’Significantly’ Cut Marketing Spending

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Groupon IPO Becomes a Must
Groupon makes money by selling discounts from businesses, then splitting the revenue with those establishments. Photographer: Scott Eells/Bloomberg

Oct. 7 (Bloomberg) -- Groupon Inc., the online-coupon site that has filed for an initial public offering, said it plans to “significantly” reduce online marketing spending over time as such investments yield insufficient returns.

Marketing spending may become less attractive because of “changes in subscriber economics, achievement of subscriber saturation levels in various markets or a determination that subscriber growth objectives can be satisfied though alternative means,” Chicago-based Groupon said in a regulatory filing today. The reduction won’t adversely impact business with existing customers or subscribers, the company said.

Until now, Groupon has had to boost spending to add users to its e-mail list, weighing on its profitability. That trend could be worrisome to investors, according to Mark Fickes, a partner at law firm BraunHagey & Borden LLP in San Francisco, who spoke before the filing.

Groupon has drawn criticism for unusual accounting practices, rising marketing costs and the loss of two chief operating officers in six months. The startup has already postponed its IPO and pushed back meetings with investors due to stock-market swings, people familiar with the matter said last month.

The company makes money by selling discounts -- known as Groupons -- from businesses such as restaurants and nail salons. It then splits the revenue with the businesses.

To contact the reporter on this story: Ville Heiskanen in New York at vheiskanen@bloomberg.net; Douglas MacMillan in New York at dmacmillan3@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom in New York at pelstrom@bloomberg.net; Tom Giles at tgiles5@bloomberg.net

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