by Tom Taulli | January 6, 2014 1:25 pm
Groupon (GRPN) recently turned five years old, much to the dismay of the many Wall Street critics who thought the company wouldn’t last this long. Despite some major struggles in 2012, GRPN has been able to reinvent itself the stock price has been in bull mode ever since. Last year, GRPN stock gained almost 150%.
Keep in mind that the company pioneered the so-called “daily deals business,” selling vouchers to consumers to get huge discounts from local businesses.
At first, the business exploded. But unfortunately, it also attracted an onslaught of competitors. There were also problems with fatigue from consumers, who started to complain about sheer volume of email offers.
While GRPN remained the clear leader in the business, it had lots of troubles, and the company’s CEO and co-founder, Andrew Mason, lost his job last March. In his place came his partner, Eric Lefkofsky, who wasted little time in reinventing the company. While he still kept a focus on deep discounts, he made the savvy move to make the website and mobile app a place for users to search for deals.
But Lefkofsky has taken some other key moves as well. If anything, GRPN is a very different company noways. Here’s a look at some of the company’s biggest changes:
When GRPN got its start back in 2008, it was part of a group of emerging Web 2.0 companies. But within a few years, mobile became a huge force. And for the most part, GRPN has been able to capitalize on that trend. Consider that in North America the company is the largest mobile local ecommerce operator. In the latest quarter, it logged more than 9 million downloads of its app — bringing the total to more than 60 million.
Digital coupons have become popular over the past couple years, especially with the growth in smartphone. One of the leaders in the space, RetailMeNot (SALE), went public in July and the shares are up about 38%. Well, GRPN wants a piece of the business too. So it recently launched a program called Freebies, which has more than 5,500 merchants, including American Eagle (AEO), Best Buy (BBY), Macy’s (M) and Nordstrom (JWN). Given GRPN’s strong mobile footprint, this initiative could get some nice traction.
GRPN is no longer just about selling discounted services. Over the past year, the company has invested heavily in its goods business. It has even taken some ideas from the Amazon (AMZN) playbook. Consider that GRPN has been building fulfillment centers, with the latest one in Hebron, Ky. Creating this infrastructure will not be cheap, but GRPN has little choice. Let’s face it, consumers expect to get their goods fast!
But the good news is that it looks like the goods segment is getting traction. During the four-day weekend for the “Black Friday” period, GRPN had a blow-out performance, with billings up almost 30% on a year-over-year basis. Some of the most popular categories included toys, electronics and home goods.
In the early days, GRPN’s M&A strategy seemed chaotic. But since then, Gropuon’s dealmaking has become much more strategic. One interesting transaction was the acquisition of Blink, which has a popular mobile app for booking last-minute trips in Europe. As Priceline (PCLN) and Expedia (EXPE) have proven, the travel business can be quite lucrative.
But perhaps the most notable deal was the $260 million purchase of Ticket Monster, which is a top mobile e-commerce player in Korea. Ticket Monster’s billings — on a year-over-year basis — have been growing at more than 50%. TMON should also served as a launchpad into other markets into Asia.
When it comes to the local commerce market, GRPN is a huge player. So Lefkofsky decided to leverage the company’s significant footprint. For example, he has put together an affordable credit card terminal system, which is tied into the GRPN offers system and its restaurant reservation platform. All in all, this should provide a nice additional revenues. But unlike Square, this is not just for mobile devices like Apple’s (AAPL) iPad; GRPN integrates with traditional Point of Sales offerings as well.
Andrew Mason set his company apart by his off-beat approach, like when he wore a cat on his head for a Wall Street Journal photo. Even though he is no longer with GRPN, the company has not lost its funkiness. After all, in response to Amazon’s fanciful idea for drone deliveries, GRPN came out with its own take: a catapult. You can check out the video here.
According to a GRPN employee: “We are a technology company, but we draw the line at creating autonomous robots that buzz by your house, wake up your sleeping baby and, who knows, take pictures of you in the shower?”
For GRPN stock investors, it’s nice to see that the company has improved its business without losing its quirky charm.
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.
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