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The Three Pillars of Groupon's Survival Strategy


It's not all about pizza coupons anymore. A forthcoming location-based mobile app, a move into direct sales, and a major acquisition put the company in a position to stay on top.

The second excuse involves revenue outside North America, which fell 21%. Europe was a particular trouble spot, not all that surprising as much of the continent struggles with soaring unemployment and spending cuts.

That shortfall was offset, however, by a 24% increase in revenue from North America.

Monster buy

The company also got points on its international position by announcing its purchase of South Korea's Ticket Monster from its biggest rival, LivingSocial, for an estimated $260 million cash and stock.

Despite its name, Ticket Monster, according to the Global Post, uses the daily deals model to sell consumer goods as well as tickets. About 90% of its sales are made through mobile apps.

Tweaked Model

Meanwhile, Groupon has been building up its website to offer a far greater range of products and services, national and local, than it originally envisioned when it was hawking coupons to merchants door to door.

The expansion includes direct sales of products, and a network of warehouses to support them. That draws inevitable -- and scary -- references to "the Amazon (NASDAQ:AMZN) model."

The two sites are nothing alike, actually. Groupon is strictly for bargain-hunters, the kind of shoppers who like nothing better than browsing through the latest fire sales and finding a weird selection of dog chews, blood pressure monitors, and guided tours of Peru.

It's a long way from 2010, when Fortune called Groupon the fastest-growing company in history. It was, too, as measured by the breakneck pace at which it was opening offices to feed daily deals websites in nearly 300 cities around the world, regardless of expense.

It was, presumably, trying to get in ahead of the competition, and it didn't work at all. By the time the daily deals frenzy peaked, in 2011, New York alone had 40 competitors spamming the population with coupons for pizza and nail salons.

It has settled down considerably since then, as has Groupon stock. It plummeted after its $20 debut in November 2011, falling as low as $2.60.

But it's still standing, and still at the top of a short list of most-visited coupon sites. A list of the top-15 daily deals sites in November, based on global traffic, shows Groupon as most-visited site, with only LivingSocial and RetailMeNot coming close.

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No positions in stocks mentioned.
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