Groupon Inc: New Ads Won’t Save GRPN Stock

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Daily deals provider Groupon Inc (GRPN) has been on a downward trajectory over the last year as investors abandoned Groupon stock due to worries about the company’s profitability. However, a new ad campaign aimed at bringing in new customers is the firm’s latest attempt at a recovery.

Groupon Inc: New Ads Aren't Enough to Save GRPN Stock

With Groupon stock down 42 percent since last year, many are wondering whether the commercials will breathe any life in to the firm’s share price.

Groupon’s most recent earnings beat analysts’ expectations, but that was where the good news ended. The company still posted a 1-cent loss for the quarter and revenue declined year over year.

GRPN execs say that the firm is in the midst of a turnaround and that the figures reflect the firm’s work-in-progress status, but traders were hesitant to buy on the promise of a bright future and Groupon stock has fallen more than 20% since the figures were announced.

The deals website is moving on though — it launched a new TV ad campaign this week that is designed to change GRPN’s image and entice the coveted millennial generation to use its service.

The Upside for Groupon Stock

The ad campaign certainly has promise. Groupon’s new commercials position the site as offering experiences and they appeal to millennials’ spending habits, which have shown they get more satisfaction from buying experiences rather than tangible products.

In the coming weeks, Groupon is expected to roll out more 15 and 30 second TV spots as well as print and radio ads that position the website as a way to connect people to local activities. Not only is the campaign designed to draw millennials in to try the service, but the firm is also hoping to move away from its image as a daily-deals email.

Whether Groupon’s marketing effort will be successful is still a question mark. Back in 2011, Groupon made its first TV debut during the Super Bowl, but the ads were poorly received and they even convinced some customers to unsubscribe to the service in protest. So far, the company’s most recent campaign is a comparative success, but that doesn’t say much.

The real question will be whether millennials are willing to get on board. Groupon is hoping to shift its image from a daily deals website to a one-stop shop for those in search of trying out new activities in their town, and millennial interest will be a key part of that shift.

The commercials, which contrast people wearing fur and owning expensive cars to those enjoying new experiences, get the company’s message across, but it’s unclear whether that message is making it to the customers who count.

With more millennials cutting the cord and using streaming services, TV spots may not be the best way to reach them.

More to the GRPN Story

Groupon’s latest marketing efforts are an important consideration for investors, but they do not make or break Groupon stock. There is a lot to worry about when it comes to GRPN, especially when you look at the company’s fundamentals.

RBC Capital has warned that the company’s billings and revenue are steadily declining, and although the number of active customers has risen, the amount Groupon has had to spend in order to acquire those customers offsets their benefit.

Groupon’s effort to attract millennials and move away from its image as a daily-deals email could be successful, but the stock is still a gamble. GRPN looks like it’s dying a slow death, and although this new ad campaign provides a flicker of life, it’s not enough for a compelling case to buy.

For now, the future of Groupon stock still looks murky and investors would be wise to remain wary.

As of this writing, Laura Hoy did not hold a position in any of the aforementioned securities.

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Marie Brodbeck has a Finance degree from Duquesne University and has been a financial journalist for more than a decade. Her work can be seen in a variety of publications including InvestorPlace, Benzinga, Yahoo Finance and CCN.


Article printed from InvestorPlace Media, https://investorplace.com/2016/06/grpn-groupon-stock-new-ads/.

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