Is Groupon's daily coupon dominance coming to an end?
Statistically speaking, not yet, but competitive social media coupon site LivingSocial.com is taking market share away from Groupon Inc., facts that could damage the company's highly-anticipated IPO.
Groupon is the popular discount-of-the-day company that started down the path of making its stock publicly traded by filing earlier this month a long-anticipated S-1 with the SEC, putting the investment world on notice that it planned to take its stock public. In the filing, Groupon revealed earnings of $644 million for the first quarter of 2011, a dramatic improvement over a total of $713 million in revenues for all of 2010 and $30 million in revenues for all of 2009.
The fast-growth private company also noted it hasn't turned a profit yet in its first three years of operations, with a net loss of $389 million in 2010, and that it expected operating expenses will increase substantially in the foreseeable future as the company continues to invest increasing its subscriber base and the number and variety of deals offered daily.
Groupon CEO Andrew Mason included a letter with the IPO filing stating Groupon is focused on growth.
Thus, the reason Groupon losing marketshare as noted in information just obtained plays so heavily into the company's IPO faring. A date has not yet been set for Groupon's initial publicly traded stock date. Some estimates have valued the company as high as $20 billion, though that number may be impacted by the recent news that LivingSocial.com is taking marketshare.
Bloomberg reported today that Groupon's share of daily deals slipped to 48 percent in may from 52 percent the previous month, potentially a significant drop for a company so focused on rapid growth.
LivingSocial claimed 24 percent of the market, up from 20 percent in April, the previous month, according to Yipit Inc, which says it studied online deals in 30 major North American cities. Yipit's researchers, according to Bloomberg, estimate Chicago-based Groupon made $64.7 million in sales in May, a figure that was still more than double what LivingSocial produced with $31.6 million in sales.
LivingSocial met Wednesday with banks to discuss its IPO of about $1 billion, CNBC reported. The Washington, D.C.-based online coupon company is epxected to have about $1 billion in revenue this year and free cash flow by 2012, according to the report. LivingSocial expects to pick lead underwriting banks for its IPO by the end of this week, according to the report.
The main reason you're seeing Groupon's market share fall is that competition is still on the upswing, said David Sinsky, data product manager for New York-based Yipit, in a Bloomberg story. Groupon's revenue is increasing, but Groupon's revenue per deal is actually decreasing because they're putting so many deals a day in front of consumers.
Groupon increased the number of deals if offered in May by 18 percent over the previous month to 4,534 while average revenue per deal dropped 10 percent to $14,277. LivingSocial increased the number of deals it offered daily in May by 59 percent to 1,932, while its average revenue per deal declined to $16,360.