Groupon Earnings: Supply/Demand Sides of Its Platform Weaken Further

The probability of Groupon creating a network effect continues to decline, as demonstrated by lower usage, user monetization, and merchants or the supply side. Under the leadership of interim CEO Dusan Senkypl, the firm’s focus remains on increasing the supply or merchants on the platform, but from a different angle, which we believe may show results next year. Groupon is aiming to become a marketing partner with merchants by providing options in terms of products and offering placements at varying take-rates for different types of campaigns—from customer retention and increasing customer frequency to quick and more direct-response customer acquisitions. While we do not expect merchants to be significantly attracted to the platform we also don't expect the partnerships to create any switching costs; we are assuming some improvement and an overall increase in the number of merchants and the level at which they participate on the platform.