SAN FRANCISCO — Groupon Inc.’s two top officers told an investment conference Wednesday afternoon that the online daily deals site is looking to shift its marketing spending away from acquiring subscribers and more towards advertising deals.
Having just exited the mandated quiet period following its controversial IPO earlier this month, Groupon participated in a conference sponsored by Credit Suisse in Scottsdale, Ariz.
At the event, CEO Andrew Mason spoke confidently of the company’s position in what has become a competitive environment, with companies like Amazon.com as well as smaller players vying for position in a business that allows local merchants to sell deals to customers via email.
“There’s no question that the barriers to entry to this business are low,” Mason said. “But the data shows with equal certainty that the barriers to success are quite high.”
He added that he believes Groupon has hit “an inflection point,” where the company’s “greatest competition is ourselves.”
Groupon completed its IPO on Nov. 3, selling 35 million shares for $20 per share. In its trading debut the following day, the stock opened at $28 and closed at $26.11. It has since fallen sharply, to close at a low of $15.24 on Monday.
The shares jumped more than nine percent in Wednesday’s strong market upswing to close at $17.50 — still more than 12 percent below its IPO price.
Among other things, Groupon has been criticized for its heavy reliance on marketing spending to grow its base of email subscribers. The company spent about $613.2 million on marketing in the first nine months of this year — about 55 percent of total revenue for the period — according to its filings with the Securities and Exchange Commission.
The company ended the third quarter with about 142.9 million subscribers, up 24 percent from the June quarter.
At the conference Wednesday, Mason and CFO Jason Childs said Groupon has improved its ability to spend marketing dollars more wisely, allowing it to lower its subscriber acquisition costs from $32 per customer in the second quarter to $25 per customer in the third quarter. In addition, the company is working to shift more spending to market deals, or “transactional advertising.”
“We now have hundreds or sometimes thousands of deals per market that we can buy search terms for,” said Childs, who added that Groupon “is going to be more like an e-commerce company, where marketing spending will match revenue growth” rather than subscriber growth.