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Groupon Relies Less On Ads to Boost Subscribers

  |  February 9, 2012   |  Comments

Deals player reduces marketing spend, plans new seasonal promotions.

Groupon still puts most of its marketing budget into subscriber acquisition, but that's lessening gradually, according to CEO Andrew Mason. On the company's Q4 2011 earnings call yesterday, Mason said marketing costs last quarter were 30 percent of total revenue - compared to more than 100 percent a year ago.

Not surprisingly, Groupon is spending more on marketing in countries where they don't have a presence. "As…markets mature, we expect to realize further leverage on the marketing line," Mason said.

The improving return on its ad investment was not enough to earn Groupon a net profit in Q4, its first full reporting period since going public. It recorded a net loss of $43 million for the quarter, on global revenue of $506 million. Revenue is defined as the billings Groupon records after payouts to merchants.

Gross billings increased during the quarter to $188 on average per customer, helped along by the Grouponicus holiday promotion, which offered giftable items in 40 North American markets. Based on its success, execs plan to try other holiday themed offers throughout 2012; the first is a selection of handpicked Valentine's Day deals.

"We don't know what we'll see going forward on other seasonal impact," said CFO Jason Child. "We're learning about seasonality."

In the six months since it launched Groupon Now, its mobile app, Groupon has grown the service to 31 markets. It's preparing to add greater personalization of Now deals in international markets. In the U.S., Groupon already targets deals by location (including home/work), gender, past buying behavior, and other factors.

By year's end, Groupon's roster of worldwide active customers had reached 33 million, a figure that includes any customer who has bought a Groupon in the previous 12 months. Quarterly growth in active customers was about 20 percent compared with the previous quarter.

Other plans for the Groupon service include adding a "thumbs up/thumbs down" mechanism. "'Please stop sending me pole dancing lessons,'" is how Mason described it to investors. "That's been a highly requested feature."

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Zachary Rodgers

Until March 2012, Zach Rodgers was managing editor of ClickZ's award-winning coverage of news and trends in digital marketing. He reported on the rise of web companies, data markets, ad technologies, and government Internet policy, among other subjects. 

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