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October 28, 2011

The Groupon IPO Analysis : 5 Charts That Can Impact Investors

Gross Billings," which Groupon formerly classified as "Revenue," continues to grow strongly, rising 25% sequentially in Q3 to nearly $1.2 billion

Revenue," the portion of coupon sales that Groupon keeps, also grew, but much more slowly: Revenue increased 10% to $430 million.

Groupon’s IPO  Presentation Pitch

Groupon’s IPO roadshow pitch is revving into high-gear this week..One of Andrew Mason's tasks on Groupon Inc.'s roadshow this week is to demonstrate to investors that the three-year-old startup is growing up and is capable of acting like a public company.
Firing underperformers is one way. Mr. Mason told investors Wednesday during a presentation in Boston that the company is replacing the weakest 10% of its salesforce

 Groupon’s IPO  Presentation Pitch

 Failing to win enough repeat customers may dampen the rapid growth that currently supports the company's roughly $11 billion valuation

As of Sept. 30, Groupon had 143 million subscribers, but in the third quarter only 30 million of them bought Groupons. Groupon currently has a salesforce of over 4,800, according to its IPO prospectus.Repeat customers increased from the second quarter but only numbered 16 million, according to a regulatory filing with the U.S. Securities and Exchange Commission.

 Why is Groupon's  growth rate collapsing?

There are a few potential reasons why their revenue growth could be stalling.
According to  Yipit Reduced marketing spend.  While Groupon was able to break even this quarter, they did so by reducing their marketing spend. Unfortunately, marketing spend also fuels growth by acquiring new subscribers. Groupon grew their subscribe base by 23% this quarter. The previous quarter, they grew by 39%.

Competition. As competition in the space heats up with Google Offers, Amazon and LivingSocial, Groupon is getting crowded out of the inbox. In Q3, the number of Groupons sold grew just 1% despite Groupon growing their subscribe base 23%.