Death of the daily deal? Groupon shares crash 30% in a day to all-time low

Groupon Nasdaq performance since Nov 2011 IPO (S&P Capital IQ; click to zoom)

Daily deal sites - so hot this time last year - continue to struggle in the US.

Groupon, the originally daily deal site, saw its shares fall 29.59% today to $US2.76, a new all-time low.

The company's stock [NAS:GRPN]  has now fallen more than 85% since its November 2011 IPO, which saw its shares reach a high of just under $US27.

The fall was precipitated by a wave of analyst downgrades on the heels of disappointing earnings.

Groupon is now worth $1.8 billion.

At its IPO height it was worth $US10 billion. In late 2010, Google (now experimenting with its own deals) is said to have offered $US6 billion for the company.

Friday (Saturday NZ time) Groupon reported a net loss for its September quarter of $US3 million (against a $US54 million profit in the year-ago quarter).

Revenue was $US569 million against the analyst consensus of $US591 million and short of Groupon's own guidance (issued in August) of $US580 to $US620 million.

CEO Andrew Mason blamed speed wobbles. The company has hired 11,000 staff in 48 countries in just 36 months, including a half-dozen at a small Auckland office.

Analysts see more systemic problems for the sector. The Wall Street Journal has questioned whether the second-biggest daily deal site, Living Social, can even survive.

Retailers have become jaded, and have started to complain about small margins and diminishing returns from daily deal specials.

And while the number of daily deal sites has thinned in the US, New Zealand and elsewhere, the survivors face new competition from Facebook's new Deals, which allow the likes of Air New Zealand to offer a daily special for every follower who likes their brand.

Trade Me recently said its daily deal service Treat Me, had performed "below a bullish forecast" but did not break out numbers.

Treat Me is the No 2 local daily deal site behind GrabOne.

In a recent filing, owner APN said GrabOne's ebitda was $A1.2 million for the first six months to June 30, with earnings expected to double in the second half. 

Founder and CEO Shane Bradley told NBR ONLINE that gross revenue was in the range of $NZ9 million to $NZ10 million a month locally.

Mr Bradley sold his final 25% stake in GrabOne to NZ Herald publisher APN earlier this year in a deal worth $NZ4 million - or up to $12 million if earn-out targets are hit.

NBR suggested it had been a good time to sell. Mr Bradley, who is staying on as CEO, said he saw more growth ahead.

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7 Comments & Questions

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Honestly - does anyone of substance really use these things? No one in our circle of friends or business aquaintences would be seen dead having anything to do with them.... Sheesh!!

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Like all promotions, it's how you use the sites.

If you use it as a business to get more revenue, you are dreaming.

If you use it as an alternative to expensive media advertising to launch a product or service, you are on to a winner.

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Ha ha. You have either bullied your friends into your way of thinking or the number of friends is small. Stats show the majority of kiwis use coupons.

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I think these sites are great and buy stuff all the time.
Apparently these sites were described as "food stamps for the middle class"....quite funny!!

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"..my circle of friends.. "
My, my-- how proudful, you are.

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The company isn't worth 1.8 billion, that's market capital. The problem with these 'businesses' is the fact that they don't need this money, they aren't expanding or using it to produce technological innovations - they simply just provide discount deals for small business.

Why did they even need an IPO?

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The company is worth exactly $US1.8 billion. That's its market value, or the sum total of all its shares.

It had an IPO for the same reasons as anyone else, so its founders could cash in, and so it could raise money for expansion.

There's been some technological innovation in terms of mobile and location-based stuff, but this is mainly just a retailer that need to hire a lot more staff to expand into a lot more countries.

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