Groupon Slashing Online Ad Spending in Q3

blog.mixrank.com

16 points·rogk11··5 comments

Groupon has simply gotten big enough they don't have to advertise as aggressively, especially in search advertising. Their partnership with AdParlor via Facebook is also running very strong.

Groupon all along has been bringing in substantial cash but also spending a huge amount towards marketing. They've saturated their markets in the US. They can now drop that marketing budget and see massive profits in their US business.

That would be like saying "since everybody already knows about Apple and their products and they are bringing in substantial cash, they can cut their spending." But instead, Apple has been increasing their ad spending as revenue has gone up http://gw5.appleinsider.com/article/?id=14437 (bit old, but still holds).

Personally, I know that I only reach for a groupon or a coupon of any sort when it's shoved in my face. For them to make such a drastic shift amidst questionable profitability on exactly the first day of a new quarter makes me inclined to agree with the author and say that it's a strategic shift in direction.

They are testing their theory that their ad spending amounts to capex. will be very interesting to see what happens. if ad spending jumps back in Q4 or revenues plummet then its probably the final nail in the coffin for the IPO valuation. if not, then for the first time in a long while my expectations for groupon long term will tick up.

I think it's just a change in strategy. Everyone I know who is a Groupon repeat user gets the emails and visits Groupon almost daily. The ROI they're getting from online ads is probably becoming marginal.

It wont solve the pathological customer issue, but that's the other weight on Groupon's back.

Nice to see Groupon empathizing with its customers, who can't afford to spend 75% of marginal revenue on customer acquistion.

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