Groupon's Marketing Spending Will Take a Year to Pay Off

  • CEO Rich Williams exploring options including TV, radio
  • Groupon hasn't received any takeover offers from suitors

Groupon Inc., the online marketplace that started as a daily deals provider, is spending millions on marketing that won’t pay off until late next year.

Chief Executive Officer Rich Williams, who was promoted to the top job last month, has committed to spending $150 million to $200 million more on marketing in 2016, a pledge that has triggered a 26 percent slump in the stock on concerns that expenses will balloon while revenue stagnates.

With marketing investments made this quarter, Groupon will start to see these pay off in the fourth quarter of 2016, Williams said in an interview at Bloomberg’s headquarters in New York Tuesday. The company will explore options including search-engine marketing, Facebook and TV ads and other traditional mediums, he said.

“We’ll play in the drive-time radio space. We’ll play in hotel elevators,” Williams said. “You’ll see us mixing it up quite a bit. We have a fun brand, and we also have a big story to tell.”

Williams, who joined Groupon in 2011 from Amazon.com Inc. after a career in marketing, is tackling the daunting task of making a former Internet darling relevant again. This year the company has cut jobs, shuttered or sold off stakes in overseas businesses and changed its top management amid disappointing sales forecasts. Groupon has struggled to reinvent itself. Part of Williams’ plan is to continue evolving into a broader online marketplace of goods, expanding into products like home furnishings.

So far, investors have remained skeptical. The shares have plunged 64 percent this year, hitting an all-time low in November. Groupon was unchanged at $3 at 11:39 a.m. in New York Wednesday, giving it a market value of about $1.84 billion.

Williams, who’s the third CEO in as many years, is pragmatic about his turnaround plan. If the marketing push fails to attract new customers, he said he’ll change his strategy.

“If we go out to market, and we see it’s not working, we are not going to blindly spend $200 million,” he said. “We are not going to waste money. If we see that, we’ll pivot.”

More changes are coming. Williams said he is evaluating the company’s operations in 36 remaining countries, and will decide in the first quarter whether to sell more stakes or shut down more overseas businesses. He is also continuing to make changes to his executive team, and “there will probably be new people who will join in relatively short order,” he said.

Groupon hasn’t received any takeover offers, Williams said.

“This can be a very large company over time,” he said. “We’ve been conservative in the next year because we have a lot of change coming.”

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