Ardent Health adopts AI-based care automation platform Qventus
The company will be deploying Qventus’ Perioperative Solution to optimize its robotics program
Read more...During Groupon’s Q3 earnings call and the ensuing share price free-fall on Thursday, I really found myself missing the days when Groupon was still a private company and we were all happy to sit back and laugh at Andrew Mason’s goofball antics. Everyone speculated on just how much money Mason was swimming in in his giant Scrooge McDuck-style money vault, but we could all rest assured that it was a lot.
Then Groupon went public and shit got real.
Last quarter saw mixed results. Groupon’s revenue came in well below expectations—including its own guidance—and it’s growing increasingly dependent on Groupon Goods. But it’s still profitable and the company had more subscribers—specifically more active subscribers—than many had anticipated.
But as far as investors were concerned, last quarter was a disaster—a Groupocalypse, if you will.
This week marks the one-year anniversary of Groupon’s initial public offering—an IPO that saw some wild speculation, including—at one point—a rumor that the IPO would value Groupon at $30 billion. Yes, the company that’s now worth $1.8 billion was once believed to be worth $30 billion.
Its coupon business is on the wane, it’s relying more and more on its sort-of-daily-deal/sort-of-e-commerce business Groupon Goods, and merchants have had a few complaints as well. The company is adding revenue streams in the form of Breadcrumb and Groupon Payments, its point-of-sale system and mobile payments offering, respectively, but the jury’s still out.
So we’re left wondering, what is Groupon now? Is it local commerce? Is it e-commerce? Is it mobile payments? Is it hardware?!
And where does it go from here?
Hemorrhaging money
Groupon isn't alone in its existential crisis. Last month, Amazon more or less outed LivingSocial as a big-time money loser. As a partial owner of the daily deals company, Amazon found itself on the hook for $169 million, or 37 cents a share. All told, LivingSocial’s net loss totaled $566 million while revenue was only $124 million.
LivingSocial CEO Tim O’Shaughnessy explained in a memo to employees that the losses—while enormous—are mostly related to non-cash items as LivingSocial had to revalue some of the companies it’s acquired. In fact, LivingSocial’s financials are very bright, O’Shaughnessy said.
“For the first time since 2009, we had positive operating cash flow for our company on a global basis in the month of September. In other words, we ended the last month of the quarter with more money in the bank than we had at the beginning of the month,” he said.
So we don’t really know anything new, other than the fact that Amazon is a big scary mother bird who eats her young.
Furthermore, LivingSocial is capturing more market share, jumping from 21% in August to 24% in September while Groupon’s market share fell to 53% from 56%.
But does LivingSocial’s growing market share make a difference if the market as a whole is shrinking?
A shrinking market
Edison Research noted in an April report that 48% of daily deals subscribers said they use services like Groupon and LivingSocial at about the same rate they did when they first started using them, but a full 32% said that they use the services less than when they first joined.
Groupon touted its new 200 millionth subscriber milestone, but only 39.5 million of those users are considered active, and that’s an increase of 37% over last year—likely due to Groupon Goods.
Furthermore, as IbisWorld noted in a February report, “the unemployment rate is positively related to demand for industry products. When unemployment rises, consumers typically pinch pennies and use daily deals websites that offer discounted products and services.” Additionally, periods of high per capita disposable income is negatively related to demand for daily deals. As per capita disposable income rises and the unemployment rate continues to fall, both of these factors will pose a potential threat to daily deal sites.
“The industry’s growth is expected to slow down significantly as per capita disposable income rises and consumers return to normal purchasing habits,” the report noted.
IbisWorld forecasts daily deals revenue as a whole to grow over the next five years at a rate of 12.9% a year to reach $3.2 billion by 2017. But it’s going to be more downhill after that. The research firm estimates that by 2017, revenue growth for the daily deals industry will drop to 7.2% a year. By comparison, daily deals revenues grew by 1602.2% in 2010.
But is that slowing growth indicative of a dying industry or a stabilizing industry?
Silver Lining
“We're not witnessing the death of the deals market, but rather a correction,” Opus Research analyst Greg Sterling tells me. “What we had for the past couple of years was a kind of ‘deal bubble.’” Consumers are always going to be drawn to deals and discounts. Those are “evergreen,” Sterling said. “However the frenzy and rampant impulse deal buying that accompanied the rise of Groupon and others in the segment is now gone.”
The hockey stick can’t go on forever.
The truth is that there is still room for growth in the daily deals space—just not in the ways that most people think about. While everyone was jumping into the daily deals space in 2010 and 2011 with everything from luxury deals, pet deals, baby deals, sexy deals (Exotic Deals—with 69 hour sales!), and gay deals (The Hookup, and Fab, for a while), few were considering the mobile angle, or how to better serve local businesses. They were all looking for new angles on daily deals rather than new inroads into daily deals.
Edison Research’s report finds that fully 26% of daily deals users own a cell phone but not a landline, while 71% have both. By comparison, 22% of the general population owns a cell phone while 61% owns both a cell phone and a landline. A full 12% of the general public doesn’t have any kind of phone, and 5% only have a landline, compared to 2% of daily deals users and 1%, respectively.
Furthermore, daily deals users are far more likely than the general public to own smartphones and tablets. So there’s a lot of wiggle room in the mobile space, which Groupon tried to capitalize on with Groupon Now—with limited success. But, that being said, mobile now accounts for a full third of Groupon transactions, and mobile users are more likely to buy a deal without needing an email to pull them in.
Additionally, Edison Research’s report finds that the typical daily deal user is not really strapped for cash, but just prefers looking for good deals. So the daily deals industry may not be tied down to high unemployment rates after all, just…cheapskates.
So, the daily deals market continues to prove itself more and more complex as the big players like Groupon and LivingSocial make inroads into uncharted territory. What we do know is that people like deals and will continue to jump on discounts where they find them. But considering the fact that no one had even heard of the concept of daily deals or group buying before 2008, we can all expect to learn a lot more as we go along.
Image sources: loggingoperation.com, edisonresearch.com
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