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Can Groupon Be Saved?


An analysis of what went wrong and, surprisingly, how it might turn around.

Nearly impossible because of its high people costs. It takes a lot of people to go door to door, from pizza parlor to dentist to dog groomer, peddling coupon offers. Groupon was trying to do that on a worldwide basis.

The latest sign that this was not a good idea came only last week, when Groupon announced its quarterly results. Superficially, a lot of the numbers looked good. Revenues were up more than 80%, to $292 million, for the US and Canada. Europe was a disaster area; no surprise there.

But the company still lost about $3 million in the quarter, and its net profit for the first nine months of 2012 was just $13.7 million. For the year as a whole, it expects to break even.

So, can this company be saved? Surprisingly, the answer is maybe.

Groupon is working on automating the process of implementing its coupon business. It's also clearly working on its tools for merchants, including a new payment app as well as marketing and bookkeeping services. These don't have much to do with coupons, but they could keep plenty of small merchants in the Groupon loop.

Another interesting twist is its acquisition of Savored, a New York-based startup that helps restaurants fill tables by offering discounts for reservations at non-peak hours.

Put it all together, and it starts adding up to a strategy. It might have been a good idea to get all that stuff in place before it expanded. But it looks like it's now or never for Groupon.
No positions in stocks mentioned.
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