Groupon Files for IPO. A Look at the Numbers.
-- Daily deal company Groupon, soon to be a major player in concert tickets, has filed for an IPO. The company's S-1, filed with the SEC Thursday, reveals that Groupon has real -- not potential -- revenue but is spending gobs of money on marketing in an effort to crowd out a growing host of competitors (which now includes Amazon.com, too).
In the quarter ended March 31, 2011, Groupon had revenue of $644.7 million, an incredible one-year jump from $44.2 million in the first quarter of 2010. In 2010, Groupon had revenue of $713 million, a huge increase from its $30.5 million in 2009 and $94,000 in 2008.
Here are some other key numbers from the S-1: Groupon had 83.1 million subscribers as of March 31, 2011; it had 56,781 featured merchants last quarter (up from 2,903); it has 15.8 million cumulative, unique customers since its inception; and it sold 28.1 Groupons in the last quarter and 30.3 million Groupons in 2010.
But the young company is not yet turning a profit -- although investors could find far worse things about this category leader. Groupon's net losses were $146.5 million in the first quarter of 2011 and $456.3 million in 2010 -- although the latter includes an acquisition-related expense of $203 million (it acquired German company CityDeal that year).
There are two main reasons why Groupon is losing millions: marketing and salaries. Groupon spent $208 million on marketing in the first quarter of 2011 alone ($180 million of it for online marketing). That accounts for 32% of revenue, up from just 9% of revenue in the prior-year period. Put simply, the company is trying to outsprint the other companies in this new and growing market with many competitors and low barriers to entry. It needs as much market share as it can get, and it's spending accordingly.
In addition, the company needs a large workforce to book all those daily deals. As of March 31, Groupon had 7,107 employees.
The Internet was filled with red flags on Thursday. Forbes.com's Maureen Farrell points out that only 33% of Groupon's 83.1 million subscribers purchased a deal in the most recent quarter. (Oddly, she doesn't point out the company has a history of attracting browsers: just 19% of total customers have ever bought a Groupon daily deal.) Another Forbes.com writer, Brett Nelson, worries about the marketing costs and warns, "its cost to acquire each additional customer has to keep shrinking." Business Insider's Pascal-Emmannuel Gobry considers dividends and redemptions on preferred stock to be the biggest red flags.
"We assume that the preferred stockholders here are Groupon's founders; usually it's venture capital investors who have "preferred stock", but we've never heard of a respectable VC asking for dividends of a money-losing startup," he writes.
Overall, however, many of the red flags thrown up Thursday were about simple profit and loss. But there's more to a company's value than its profit or loss. Groupon's long-term value could either be enormous or just merely large. We'll have to see how this retail category shakes out in the coming years. In the short term, the company probably has enough fervent believers to merit investing in the IPO and riding the wave of enthusiasm.
(S-1 SEC filing)
Mobile Roadie Discontinues Blackberry Self-Serve App Platform
-- Uh oh, Blackberry. Mobile Roadie has discontinued the self-serve app platform for Blackberry it launched back in December. Not only does the Blackberry present a unique set of challenges (smaller screens, weaker processors), but the company found that Blackberry users were far less engaged than iPhone and Android users (by a factor of 20!), CEO Michael Schneider explained at the company's blog. "This wasn't an easy decision, but in the end, we determined that our resources are better spent on iPhone/Android, where users do frequently use apps, engage with them, and transact."
(Mobile Roadie blog)
Bronfman WMG Shares Sold For $5.96 Million
-- Shares owned indirectly by Warner Music Group chairman/CEO Edgar Bronfman Jr. were recently sold for $5.96 million at an average weighted price of $8.227, according to an SEC filing dated June 1, 2011. The sales took place on May 27, May 31 and June 1. The filing states that the shares were "held directly by one of three trusts for the benefit of Mr. Bronfman or a member of his immediate family, of which Mr. Bronfman is a trustee."
Bronfman has direct ownership of 6,800,199 shares of Warner Music Group common stock, according to the filing. At the $8.25-per-share winning bid by Access Industries, Bronfman's 6,800,199 shares are worth $56.1 million.
(Form 4 SEC Filing)
CNET/LimeWire Lawsuit May Be Off To Rocky Start
-- The lawsuit against CNET for distributing the LimeWire P2P software may not be off to a good start. From Wired: "U.S. District Judge Dale Fischer in Los Angeles has been pushing the plaintiffs to specify the content pirated on LimeWire -- a prerequisite to pressing the case. On Tuesday, they complied, and it's probably safe to say that CBS won't be sued out of existence. The list consists of one movie, the critically panned 2007 "Splash" ripoff "Fishtales," and five music tracks that do not yet have U.S. copyright registration granted."
Then again, P2P-related lawsuits tend to name just a few dozen songs that were illegally uploaded. With a maximum of $150,000 per work, potential damages would reach levels of ridiculousness if a plaintiff included a long list of alleged infringements.