Groupon closes another forgettable quarter on the stock market
While all indications were that Groupon and Groupon closes other daily deals and ad revenue marketplaces were heralding a new segment in small businesses, time has shown that their business model is fundamentally flaw.
Groupon last week post another disappointing quarter of earnings as its core business stagnat, sending its shares down 30 percent to a record low of $2.76 .
Its biggest rival, Living Social, is racking up losses , and one of its owners, Amazon.com, post a quarterly loss this month after writing down its investments in Living Social.
Both companies are rapidly diversifying into more generic areas of e-commerce , such as off-price sales through venues like Groupon Goods and LivingSocial’s Shop . Meanwhile, new firms are developing new variations on the coupon business.
“It’s clear that they ne to have other models besides the daily discount email business ,” said Raymond James analyst Aaron Kessler. “The problem is that many of these new businesses have lower margins.”
Market value
Critics say the strong growth that allow Groupon to list of georgia consumer email go public at $20 a share a year ago was fuel by merchants buying into a new kind of marketing they didn’t fully understand .
Discounts offer through Groupon coupons have proven to be costly and the return on business they generate uncertain.
“A lot of people made the mistake of overlooking the price-promotion part of this model ,” said Utpal Dholakia, a management professor at Rice University’s Jones School of Business.
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“The hiring of ads in the yellow pages does boost your business through business networking: tips and strategies for success not really have a price promotion, it does not have the discount component ,” he add.
A Raymond James survey of nearly 115 adb directory merchants who us daily deal services this fall found that 39 percent of them said they were unlikely to run another Groupon promotion in the next two years.
The main reasons cit were high commission rate and low rate of repeat customers following a promotional offer.
The Raymond James survey also found that 32 percent of merchants report losing money on promotions and nearly 40 percent said Groupon’s offer was less effective than other types of marketing.