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Will the RetailMeNot IPO Be Groupon All Over Again?

Don't worry — it probably won't be

Wall Street can be excused if it’s a little skeptical about RetailMeNot‘s filing for a public offering.

The last time an online coupon operator went public, it turned out to be a disaster. Back in November 2011, Groupon (GRPN) pulled off an IPO, only to have its shares beat up by as much as 62%.

But perhaps Groupon is far back enough in the rear-view mirror for Wall Street to be receptive to another coupon site.

RetailMeNot — which operates the world’s largest digital coupon marketplace, covering more than 60,000 retailers and brands — plans to list on the Nasdaq under the symbol “SALE.” Lead underwriters include Morgan Stanley (MS), Goldman Sachs (GS) and Credit Suisse (CS).

Since launching in 2009, RetailMeNot has grown like a weed. Last year, the company’s websites and mobile apps attracted more than 450 million visits. Revenues hit $144.7 million, which translates into a compound annual growth rate of 193%.

And unlike other players (I mean you, Groupon), RetailMeNot knows how to make a profit. From 2010 to 2012, its net income rocketed from $2.3 million to $26 million. That’s $26 million in GAAP-compliant profits, not on an adjusted basis or computed using new metrics. (Again, I’m looking at you, Groupon.)

It helps that RetailMeNot has a low cost of user acquisition; about 90% of the traffic comes from non-paid sources.

But it looks like RetailMeNot is only scratching the surface of the opportunity. Right now, about 78% of the company’s revenues come from the U.S., so there’s plenty of opportunity to get aggressive in global markets. The company already is making headway in the U.K., France, Germany and the Netherlands.

Mobile commerce is also likely to be a huge boost, given how easily coupons work on smartphones. According to a report from IDC, the global mobile commerce market hit $63.4 billion last year and is forecast to grow at 36% per year until 2017.

A key to RetailMeNot’s success is its personalization technology. The company essentially leverages Big Data systems — by accessing information such as “Likes” on Facebook (FB) — to make relevant coupon offers to its users. It also features a sophisticated search system that makes it easy for consumers to find deals.

All this means that while RetailMeNot is in the same business as Groupon, the company itself is very different. It has a solid business model that generates strong growth and profits, and is building a platform that should benefit from the megatrend in mobile.

So is RetailMeNot the next Groupon? Hardly. It’s probably better.

Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO StrategiesAll 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.

Article printed from InvestorPlace Media,

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