Groupon closes another stock market quarter to forget
Posted: Sat Dec 07, 2024 10:28 am
While all indications were that Groupon and other daily deals and ad revenue marketplaces were heralding a new segment in small businesses, time has shown that their business model is fundamentally flawed.
Groupon last week posted another disappointing quarter of earnings as its core business stagnated, sending its shares down 30 percent to a record low of $2.76 .
Its biggest rival, Living Social, is racking up losses , and one of its owners, Amazon.com, posted a quarterly loss this month after writing down its investments in Living Social.
Both companies are rapidly diversifying into more generic areas of e-commerce, such as off-price sales through venues like Groupon Goods and LivingSocial's Shop . Meanwhile, new firms are bhutan email address developing new variations on the coupon business.
"It's clear that they need to have other models besides the daily discount email business ," said Raymond James analyst Aaron Kessler. "The problem is that many of these new businesses have lower margins."
Critics say the strong growth that allowed Groupon to go public at $20 a share a year ago was fueled by merchants buying into a new kind of marketing they didn't fully understand .
Discounts offered through Groupon coupons have proven to be costly and the return on business they generate uncertain.
"A lot of people made the mistake of overlooking the price-promotion part of this model ," said Utpal Dholakia, a management professor at Rice University's Jones School of Business.
You may also be interested in: The true group purchase is born, duyudu is born
"The hiring of ads in the yellow pages does not really have a price promotion, it does not have the discount component ," he added.
A Raymond James survey of nearly 115 merchants who used daily deal services this fall found that 39 percent of them said they were unlikely to run another Groupon promotion in the next two years.
The main reasons cited were high commission rate and low rate of repeat customers following a promotional offer.
Groupon last week posted another disappointing quarter of earnings as its core business stagnated, sending its shares down 30 percent to a record low of $2.76 .
Its biggest rival, Living Social, is racking up losses , and one of its owners, Amazon.com, posted a quarterly loss this month after writing down its investments in Living Social.
Both companies are rapidly diversifying into more generic areas of e-commerce, such as off-price sales through venues like Groupon Goods and LivingSocial's Shop . Meanwhile, new firms are bhutan email address developing new variations on the coupon business.
"It's clear that they need to have other models besides the daily discount email business ," said Raymond James analyst Aaron Kessler. "The problem is that many of these new businesses have lower margins."
Critics say the strong growth that allowed Groupon to go public at $20 a share a year ago was fueled by merchants buying into a new kind of marketing they didn't fully understand .
Discounts offered through Groupon coupons have proven to be costly and the return on business they generate uncertain.
"A lot of people made the mistake of overlooking the price-promotion part of this model ," said Utpal Dholakia, a management professor at Rice University's Jones School of Business.
You may also be interested in: The true group purchase is born, duyudu is born
"The hiring of ads in the yellow pages does not really have a price promotion, it does not have the discount component ," he added.
A Raymond James survey of nearly 115 merchants who used daily deal services this fall found that 39 percent of them said they were unlikely to run another Groupon promotion in the next two years.
The main reasons cited were high commission rate and low rate of repeat customers following a promotional offer.