Daily deals giant Groupon is finally moving forward with its IPO after showing more progress toward profitability. In a revised S-1 filing, the company said it will sell 30 million shares priced between $16 and $18, which would raise about $540 million and value the company between $10.1 and $11.4 billion.
The company plans a two-week roadshow managed by its Wall Street underwriters headed by Goldman Sachs, Morgan Stanley and Credit Suisse. The market has seen only four IPOs since September 1.
When Groupon filed its initial IPO on June 2, the Chicago-based daily deals company hoped to raise $1 billion before going public in order to achieve a $20 billion valuation. However, there are still more questions than answers surrounding Groupon, specifically how the company plans to keep subscribers while slashing marketing costs.
We are currently spending more than just about any company ever on marketing, Groupon CEO and co-founder Andrew Mason wrote in an internal memo to his employees in August. In Q2, we spent nearly 20 percent of our net revenue on marketing, while a typical company spends less than 5 percent.
However, Mason believes Groupon's marketing expenditure is justified.
Why do we spend so much? The simple answer is 'because it works,' he said. But that's the only part of what makes our situation special.
Groupon's marketing effort may explain why the company is more than twice the size of LivingSocial, the next-largest daily deals site. Regardless, the company is scaling back its IPO estimates.
Groupon, which will list on the Nasdaq, reported revenue year-over-year more than quadrupled to $430.1 million from $81.8 million. The company has also succeeded in trimming marketing costs from $432 million in the first six months of 2011 to $181 million.
The company has also enjoyed steady growth over this period. The company increased its subscriber base from 21 million in 2010 to 143 million, and has accrued about $244 million in cash.
Groupon is also expanding its number of offerings. On Sept. 28, the company launched two new services, including Groupon Goods, which is a platform for buying hot products at cheap prices, and a loyalty system called Groupon Rewards.
Other competitors are catching up. Premier rival LivingSocial grew five times faster than Groupon in September, while up-and-coming sites like AmazonLocal and Google Offers are experiencing growth in the triple digits.
While Amazon.com may have 130 million active buyers, those people aren't all interacting with Amazon daily, said ChannelAdvisor CEO Scot Wingo. But Groupon touches its subscriber base daily, which you can't say about anyone else in retail, with the exception of flash sale sites.
As a whole, the daily deals industry makes about $3.2 billion annually, which reflects gross revenues and not direct revenues each company receives after splitting the value of each deal with the merchants.
Groupon has more than 7,000 employees offering more than 1,000 daily deals to 83 million subscribers across 43 countries.