Groupon Missed on Revenue, but the Shares Spiked Anyway

Markets Motley Fool

In this Market Foolery segment, host Chris Hill and Motley Fool Funds' Bill Barker consider whether the daily-deals innovator has a value proposition at all, and more to the point, whether it has a value for some other e-commerce, online advertising business that might acquire it. And what can Groupon (NASDAQ: GRPN) do to revitalize itself from here?

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A full transcript follows the video.

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This podcast was recorded on Aug. 2, 2017.   

Chris Hill: Let's move on to Groupon. Second-quarter revenue came in lower than expected, but it couldn't have been that bad, because shares of Groupon are up more than 7% this morning. I don't know where to go with this one; I'll be absolutely honest. The thing I can't get over with Groupon, and we've talked plenty of times in this calendar year about Snap and Blue Apron and the way those stocks have gone since their IPO. They pale in comparison to Groupon, which, since its IPO in late 2011, that stock is down, even with today's move, more than 80%. And I just don't see the case for this company. It seems like it really does belong as part of someone else's empire. And I'm sure there's a price at which someone, whether it was Google or perhaps even Facebook, there's a price at which they would probably pay to acquire Groupon, but it can't be a whole lot higher than where it is today.

Bill Barker: I guess I have to wonder as to why there's a price they would acquire Groupon at. Granted, Groupon has an email database. They have a lot of people ignoring their daily emails.

Hill: Are you on their list?

Barker: I don't think so, or the spam filter is doing its job. But I don't think I'm on it. I assume they're inundating people with daily emails, if you choose to get those. But those names, Facebook and Google and Amazon, they already have your email. They already have everybody's email. If they don't have it, Groupon isn't going to have it, because you have to be off the grid, I think.

Hill: No, I think that's probably right.

Barker: So why are those people going to acquire Groupon?

Hill: One thing we talked about the other day was Costco marketing their memberships through Groupon, and we were laughing, because -- and by "we," I mean Jason Moser, Taylor Muckerman, and I -- all had the same gut reaction, which was a slight wincing, like, "Oh, God, what is Costco doing?" But then, the more we talked about it, it was -- first of all, this is a relatively small test, presumably, for Costco. And if it's effective for Costco, then they've gotten people into their membership. We know Costco is already really good at retaining members. So that could be a smart move for them. That got me thinking about this latest quarter for Groupon. Maybe that gives this company a little bit of life, if they're seen as a really effective way of getting people into memberships. But the whole one-off experience thing, I don't know. All you have to do is look at the performance of this stock since they went public to know the health of this company, and it's not great.

Barker: No, it's not great. Although it's bounced significantly off its lowest lows of the year. So there's a little bit of hope. They do have enough people in the database that, if they can come upon a more useful way to get offers to people than they have, and advertising, of course, something they've been really firing on all cylinders on, in your opinion.

Hill: [laughs] On YouTube. God, those things are the worst, they're just absolutely the worst. They are the most --

Barker: What are those things? Because they're not targeting me.

Hill: They're YouTube ads. So if you go on YouTube --

Barker: I do go on YouTube, and I see helpful ads.

Hill: You know, there are some creative ads on YouTube these days, and some that are creative enough that I will actually sit and watch them before whatever video I'm looking for actually loads. But Groupon, I'm not going to --

Barker: Could you sing a little bit of it?

Hill: No, I'm not going to do that. I'm not going to pain people with the annoying singing Groupon ads. Those people know who they are. Whatever this ad agency in Chicago that came up with them -- you have to be concerned. You have to be concerned if you find out that your ad business is done by the same people in Chicago who are doing the Groupon YouTube ads.

Barker: You know what? There's no such thing as bad publicity. Right now, they're getting talked about a lot. You have dozens of listeners, and they're all hearing about this and going to YouTube right now, loading and loading and loading again waiting for that Groupon ad to assault them.

Hill: As soon as they see it, they're going to know exactly what I'm talking about.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Bill Barker owns shares of Alphabet (C shares). Chris Hill owns shares of Amazon. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Costco Wholesale, and Facebook. The Motley Fool has a disclosure policy.