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Groupon plans to trim its marketing expenses
A new filing by the daily deal operator address criticisms over customer acquisition costs.
The company, which spent $432.1 million to attract new customers in the first half of this year and $284.3 million in 2010, has said in previous filings that it expects to continue spending “significant amounts” to acquire additional subscribers.
However, in a U.S. Securities and Exchange Commission filing today, the company emphasizes that such spending will taper off. “Over time we believe we will reach the conclusion that the resources presently being devoted to online marketing initiatives are not yielding sufficiently attractive investment returns due to a variety of factors such as changes in subscriber economics, achievement of subscriber saturation levels in various markets or a determination that subscriber growth objectives can be satisfied though alternative means. As a result of such factors, we anticipate significantly decreasing the amount of such investments,” reads the filing.
Groupon says that it doesn’t think that cutting back on its marketing costs will have an adverse effect on the rate at which existing customers buy its vouchers or other offerings because those expenses are geared to attracting new subscribers rather than driving transactions with its existing customer base.
But the company did note that its operating costs will likely continue to grow for the foreseeable future as it invests in increasing the number and variety of deals it offers, expand its marketing channels, expand its operations, hire staff and improve its technology.
The filing notes that those efforts are necessary because some of Groupon’s competitors, such as Google Inc., have some competitive advantages. “Many of our current and potential competitors have longer operating histories, significantly greater financial, marketing and other resources and larger subscriber bases than we do,” Groupon says in the filing. “These factors may allow our competitors to benefit from their existing customer or subscriber base with lower customer acquisition costs or to respond more quickly than we can to new or emerging technologies and changes in consumer habits.” One example of a competitor leveraging its existing infrastructure is Google last month promoting its daily deal offering on Google.com. Google-owned web sites, which include YouTube.com, attracted 183 million unique U.S. visitors in August, making Google’s properties the No. 1 destination for U.S. Internet users that month, according to comScore Inc.
The filing is the latest in a number of amended S.E.C. documents from Goupon. Earlier amendments aimed to address concerns over the company’s unusual accounting practices, as well as its reported revenue.
Groupon had 115.7 million subscribers, as of June 30.