Groupon Buys Korean Deal Website as Mobile Lifts Revenue
Groupon Inc. (GRPN) said more people are flocking to deals offered on mobile devices as the company transforms itself into a service offering thousands of discounts instead of a daily deal e-mailed every day. The shares rose.
The e-commerce company, which said yesterday that it agreed to buy Ticket Monster Inc. in South Korea for $260 million in cash and stock, reported that sales rose 4.7 percent to $595.1 million in the third quarter, and a net loss of $2.58 million.
While revenue missed analysts’ average projection for $615.7 million, the loss was narrower than the prediction for $14.3 million, according to estimates compiled by Bloomberg. The quarter marked the first full period under Chief Executive Officer Eric Lefkofsky, who is seeking to turn around the daily deals provider after the Chicago-based company lost more than 80 percent of its value in its first year after going public in November 2011.
“Mobile is doing very well,” Blake Harper, an analyst at Wunderlich Securities Inc., said in an interview. “And the T-Mon deal -- the financials are a little better than expected.”
Ticket Monster “serves millions of customers with a broad range of product, local and travel offers” and has more than $800 million of annualized billings, Groupon said. Groupon said Ticket Monster is close to break-even on an EBITDA basis.
Groupon rose 6.4 percent to $10.11 at the close in New York. The stock is down almost 50 percent from its 2011 IPO price of $20. By comparison, Twitter Inc. (TWTR) rose 73 percent at its market debut yesterday following its initial public offering.
Groupon forecast fourth-quarter revenue of $690 million to $740 million and operating income of $40 million to $60 million. Analysts on average polled by Bloomberg estimate sales of $723.7 million, and operating profit of $46.1 million.
“It’s going to be tougher for them to grow because the e-commerce space is very competitive,” Edward Woo, an analyst at Ascendiant Capital Markets Group LLC, who has a sell rating on the stock, said in an interview. “There’s consumer fatigue, consumers aren’t as interested any more.”
Jason Child, Groupon’s chief financial officer, said in an interview that changes to Google Inc. (GOOG)’s Gmail service, which began placing e-mail promotions into a separate tab, caused fewer people to open e-mails touting the company’s daily deals.
“It definitely had some impact on click-through rates,” Child said, adding that seasonality had an impact as well.
Tim Drinan, a spokesman for Google, declined to comment.
Still, Child said Groupon reached a record in mobile usage, with more than 60 million downloads of the mobile application. More than 40 percent of transactions were completed on smartphones and tablets during September, he said.
Groupon makes money by offering discounts -- known as Groupons -- from businesses such as restaurants and nail salons. It then shares the revenue with the merchants.
Earlier this month, Groupon unveiled a redesigned website and new mobile apps. The company now offers a personalized homepage with curated collections of deals based on a customer’s interests and prior purchases. The updated mobile software detects when a consumer’s location changes to provide local deals.
Groupon has also diversified into new areas. In July, it added an online restaurant-booking service that offers discounted meal, called Groupon Reserve.
The acquisition of Ticket Monster will make South Korea the company’s second-largest market after the U.S., Child said.
“Ticket Monster is a perfect fit for Groupon as we continue to transition our business globally from a flash sale e-mail model to a mobile commerce marketplace,” Lefkofsky said in a statement. Since Groupon is buying Ticket Monster from LivingSocial Inc., the online-deals competitor may hold on to the stock, or distribute it to shareholders.
“Groupon is hardly standing still, it’s made some fairly dramatic changes in its business model,” Peter Krasilovsky, an analyst at researcher BIA/Kelsey, said in an interview. “It’s a very different company than the one from a few years ago.”
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