Groupon's Revised S-1 Offers Hints At Its Profitable Future

Did the new numbers in Groupon's pre-IPO filing leave you ready to write off the daily deals company? Maybe you should take a second look.

Andrew-Mason

The coverage of Groupon’s revised S-1 filing Wednesday mostly focused on the deep red numbers splashed across the company’s balance sheets. And rightly so. Because as much money as the company is bringing in, it’s still a ways from making a profit.

And yet, sprinkled among the revisions to the document were other interesting tidbits--ones that speak to where the company is going. And, if looked at in the right light, they could hint at a more promising future than some might think.

Groupon has registered, or has pending, 160 trademarks in 60 countries around the world. And not just for the words “Groupon” or even “Groupon Now,” its new instant deals service. The company has also registered for other “Groupon-formative marks,” the S-1 says.

CEO Andrew Mason has long said that the daily deals business is just the tip of the iceberg of Groupon's plans to reinvent local commerce. The company has already started to make inroads into new ways to bring together buyers and sellers. Groupon Now, which the company launched in June, lets local merchants move excess inventory during slow times. Groupon Live, also launched this summer, similarly lets promoters move seats when tickets for live performances are sluggish. And Groupon Getaways, the new partnership with Expedia that went live last month, is moving travel deals.

But we suspect there are many more such variations to come, and Groupon's trademark-registration bonanza seems to hint at the same.

“Local commerce reflects a humongous space,” Mason told Vanity Fair in its August issue. “We’ve only just gotten started.”

Groupon’s recent acquisitions will help it expand into new lines of business. The revised S-1 makes references to two companies Groupon acquired in the third quarter of this year. “The primary purpose of these acquisitions was to enhance the Company's ability to develop software in-house and improve the services provided to the Company's customers and merchants through implementation of the technologies powered by the acquired companies,” the filing reads.

According to CrunchBase, the two companies are Obtiva and Zappedy. The former appears to have been a talent acquisition of developers of web applications. But the second, according to CrunchBase, enabled small businesses to market themselves online as well as reach customers and track their offline purchases.

Again, these call to mind Mason's vision of transforming local commerce. “We want to change the way that people buy and discover from local businesses in the same way that Amazon has changed the way that people buy products,” Mason said in the Vanity Fair piece. These two acquisitions--in addition to the many others Groupon has previously made--could indeed help the company expand the ways in which it does that.

The company finally crossed the billion dollar mark. Mark this on your calendars: Less than three years after it launched, Groupon pulled in a billion dollars. And not even in a single year--in the first half of a year.

In 2008, the company made a mere $94,000 after launching in October. In 2009, it pulled in $30 million. Last year, it brought in $713 million. And in only the first two quarters of 2011, it pulled in a whopping $1.5 billion.

Yes, the company still is losing more than it’s pulling in. But even those numbers seem to be looking up. Groupon lost $331 million in the fourth quarter of last year, $117 million in the first quarter of this year, and now, in the second quarter, only--if such a large sum can be said to be “only”--$102.5 million.

In a memo emailed to Groupon employees at the end of last year, Mason wrote that he hoped to bring in at least $1B in revenue, not just from the daily deals email, but "from new products we launch in 2011."

The key there lies in his phrase "the new products." If you take a look at the numbers in the updated S-1, and evaluate them solely on the basis of Groupon’s current business--daily deals--then it’s reasonable to be concerned.

But if you think of the daily deals business as just the tip of a much larger iceberg—one that will unleash a string of offerings that might very well revolutionize how commerce is done between local businesses and consumers—then the losses look more like a down payment on a potentially lucrative future.

It’s not clear, of course, whether that future will come to pass. Back in June, when Groupon filed its initial S-1, we wrote that Groupon could either be the next Google or the next Webvan. And the jury’s still out. But it’s out on both sides of the equation—both on whether it will succeed spectacularly, or whether it will fail likewise.

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2 Comments

  • Darrell Ellens

    I agree that some of Groupons losses, can be looked at as a down payment on things to come.  Today's business owners have to adapt and accept the fact that technology is changing the way we do business.
    Many small to medium sized businesses crossed their fingers when it came to advertising.  Now there is a lot more work involved unless they farm it out. Going from old school to new school is a challenge, especially when their is no finish line as technology keeps on advancing.

  • robfilomena

    If Groupon is losing as much money as they are in their core business, and doing so with deal terms that are, shall we say unsustainable, what faith can we possibly have that they can do anything else well? Profits, not growth, equal success. It's a simple equation, one that is once again lost in the heat of tech investment frenzy.