Is Coupons.com the Next Groupon Inc?

Learn how digital coupons site Coupons.com plans to improve top line and user metrics in a fierce business environment.

Feb 3, 2014 at 1:30PM

16 years after opening its digital doors, digital coupon site Coupons.com has filed with U.S. regulators for a long-awaited initial public offering on the New York Stock Exchange. It is expected to raise up to $100 million. The news comes a few days after a rumor stating that cloud-storage company Box reportedly filed a "secret" IPO and confirms the idea that Internet companies see 2014 as a great time to jump to go public. I'm sure some of this was inspired by Twitter's successful initial public offering late in 2013.

With more than 2,000 brands on its catalogue, 17 million unique monthly visitors on average, and over 1.3 billion transactions handled in 2013, Coupons.com appears to be on its way to becoming a leading player in the fierce e-commerce industry, a space dominated by online retail giants Amazon.com and eBay (NASDAQ:EBAY). Can this Coupons.com continue to grow its business and eventually replace Groupon (NASDAQ:GRPN) as the world's largest daily deals website?

Logo

Source: Coupons.com | Corporate Website.

There's a long story behind Coupons.com
Coupons.com isn't a new start-up. The company was founded in 1998, only three years after eBay started and nearly a decade before Groupon was launched.

Unlike eBay, which escalated pretty fast and was already profitable by 1996, Coupons.com had a rough start. According to the company's website, Coupons.com's management spent three painstaking years developing the technology needed to enable digital coupons to work for manufacturers, which issue coupons, and retailers, which redeem them. The development process was particularly tricky due to security concerns and print controls.

The road to profitability
Even after these technological challenges were cleared out, Coupons.com still had to deal with manufacturers willing to shift their promotion budgets from newspapers to digital tools. Eventually, the website started escalating, as it started benefiting from a shift in consumer behavior. Manufacturers also started shifting their promotion budgets from traditional channels to websites like Coupons.com.

These trends helped Coupons.com to improve its top-line performance. However, the company is still finding it hard to make money. During the first nine months of 2013, it generated revenue of $115.3 million, a 51% increase from the same period in 2012. However, this wasn't enough for Coupons.com to generate positive cash flow, as the company registered a net loss of $12.8 million. On the bright side that loss was 75% less than last year. 

A different business model
Notice that, unlike most e-commerce players, Coupons.com makes money when a customer downloads a coupon for redemption at a grocer or physical retailer. In this way, Coupons.com acts as a complementary platform to traditional retailers, like Wal-Mart, which is one of Coupons.com's biggest partners.

Unlike Groupon, which tends to provide discounts only when a certain number of people sign up for a given offer, Coupons.com only requires its customers to install a free-printing software before printing coupons. This software allows Coupons.com to control demand and the supply of coupons.

Coupons.com's business model has certain advantages. For example, unlike Groupon, the company is said to make money whenever a customer selects or prints a coupon, even if the coupon is not used to buy a product. However, Coupons.com's operating margin may not be as high as Groupon, which is said to enjoy a 43% gross profit margin on deals with local merchants. Groupon also started offering digital coupons in November of 2013, in an attempt to move beyond daily deals.

Final Foolish takeaway
After several years in the business of digital coupons, Coupons.com is finally going public. The company is not yet profitable, but it is getting close to operating in the black, thanks to a steady increase in traffic and handled transactions.

More importantly, there is plenty of room for growth, as digital coupons in 2012 represented less than 1% of total coupon distribution volume in the U.S. As consumers continue spending more time online, the digitalization trend in the coupon world is likely to strengthen. Given this promising context, if Coupons.com manages to improve its operating margin and remain competitive, the company could have a real chance of becoming a player in the e-commerce arena. 

Learn which companies are the real cash kings changing the face of retail
To learn about two retailers with especially good prospects, take a look at The Motley Fool's special free report: "The Death of Wal-Mart: The Real Cash Kings Changing the Face of Retail." In it, you'll see how these two cash kings are able to consistently outperform and how they're planning to ride the waves of retail's changing tide. You can access it by clicking here.

 

Adrian Campos has no position in any stocks mentioned. The Motley Fool recommends eBay. The Motley Fool owns shares of eBay. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers