Tuesday, December 10, 2013

Facebook & Groupon: Morgan Stanley Full Story Mentioned by Barron's & CNBC

Groupon: Morgan Stanley Likes Technology
Renovation in Web site, Email, Mobile -- Barron's Blog
Dec 10 at 13:09
Profile hits: QU3

      (This story was published by Barrons Online's Tech Trader Daily blog at
http:/ /blogs.barrons.com/techtraderdaily/)
      By Tiernan Ray
      Morgan Stanley's Scott Devitt today pounds the table in favor of shares of
Internet daily deals purveyor Groupon ( GRPN), reiterating an Overweight rating
and a $15 price target -- mind you, with a target time frame of 2015 --
writing that his meeting with management gives him confidence the company is "on
the path to become a unique mobile commerce marketplace at scale."
      Groupon shares today are up 51 cents, or 5.3%, at $10.13.
      Devitt writes that Lefkofsky explained in their meeting a number of
initiatives the company has underway that Lefkofsky thinks investors don't fully
      Those things include investing money in mobile technology and " reducing
the friction to Groupon redemptions," meaning the ease with which consumers are
able to use a coupon at a merchant.
      Devitt observes that Groupon still has to build out some major areas of
its technology, things as simple as how it tracks deals it has issued:

      Underpinning these initiatives is the fact that Groupon is still in the
process of building the appropriate technology infrastructure to drive these
initiatives. For instance, Mr. Lefkofsky noted that while it is one of the
biggest email marketers in the world, Groupon does not have a way to track the
deals it offered to a consumer in previous emails and which ones a consumer may
have clicked on. Additionally, the company has not changed the layout of the
email, which often juxtapose deals from very different categories together.
Groupon is testing a new email product, which lays out deals according to
personalized categories and allows Groupon to track what deals consumers look at
and/or act on (i.e., click on or buy).
      Another avenue the company has pursued is a site redesign that went live
last month, which is supposed to bring in more prospects among consumers:
      CFO Jason Child noted that every scaled eCommerce company has to spend in
order to drive customers into the top of the funnel. The previous site did not
allow this to occur, which meant that Groupon sacrificed a key marketing channel
for customer and transaction acquisition. Mr. Lefkofsky that SEO and SEM will
ultimately provide a big lift to the business and that search results will
ultimately snowball as more consumers go to the site through search.
      Devitt's own research suggests to him the company still has vast tracts of
merchants it can sign up to offer Groupons:
      Despite $1.7B in local deals gross billings in North America, we believe
that Groupon has a long run way of merchants that it can add to its platform.
Our AlphaWise survey of 358 small-medium businesses indicates that 26% of
merchants ran deals with Groupon over the past 12 months. While Groupon's
platform is not ideal for all types of merchants, we believe that as Groupon
expands product lines and draws in more users, its platform has the potential to
become more viable and attractive over time to a broader set of merchants.
      How effective is Groupon? Devitt cites some data showing a fraction of
users come back to a merchant after a first visit, even without a coupon:
      According to data from our survey, we believe that merchants see between
10- 20% of Groupon customers return without a Groupon. Restaurants see a higher
percentage of return customers than service companies though we note that for
some services, the gap between visits could be long (e.g., people normally go to
a dentist once a year). However, we note that the percentage of customers that
return likely depends on several variables that are not easily measured through
a survey. Among other forms of digital advertising, our survey indicates that
Groupon ranks as the 3rd or 4th most effective digital advertising medium after
Google ( GOOG), Facebook ( FB), email, and Yelp ( YELP).

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