This has been a rough year for online coupon aggregators, with RetailMeNot (SALE) and recent debutante Coupons.com (NYSE: COUP) falling sharply. RetailMeNot slumped again on Monday night after posting disappointing quarterly results.
The third quarter itself exceeded expectations. Net revenue climbed 19% to $56.5 million over the past year, just ahead of the $56 million analysts were targeting. Adjusted earnings fell from $0.19 a share a year earlier to $0.16, but that was better than the $0.13 the Wall Street pros were forecasting.
Guidance proved to be problematic. RetailMeNot sees revenue climbing 8% to 10% during the seasonally potent holiday quarter, and clocking in with $84.7 million to $86.7 million on the top line is well short of the 16% growth spurt analysts were expecting. RetailMeNot didn't initiate its guidance for 2015, but it's a safe bet that analysts will talk themselves out of the 20% in revenue growth that they were modeling before Monday's report.
RetailMeNot went public at $21 two summers ago, and it traded as high as $48.73 earlier this year. Fellow discount provider Coupons.com went public a few weeks after RetailMeNot's February peak, and it's been largely downhill ever since.
RetailerMeNot took a huge hit in May, after Google (GOOG -1.96%) updated its search algorithms in a way that slammed RetailMeNot's organic traffic. A juicy part of RetailMeNot's fat profitability come from its ability to generate traffic without having to pay for the leads. A more recent update from May's devastating Panda 4.0 Google update has been reportedly been more favorable to RetailMeNot, but clearly things are exactly going swimmingly as revenue growth continues to decelerate.
Another unwelcome trend in Monday's report is the decline in revenue per visit. A big draw to RetailMeNot's mid-2013 IPO was its ability to milk more money out of every lead by working with more advertisers to effectively hook up a visitor to a marked-down bargain.
Revenue and earnings had climbed 80% and 53%, respectively, in 2012, with the average visit generating $0.358 in revenue, up 22% when pitted against 2011. That trend is now starting to go the other way. RetailMeNot visits grew 22% to 161.5 million during the quarter versus last year's third quarter, faster than the 19% uptick in revenue. The explosion in mobile usage and healthy international growth are likely playing key roles in that, but this is still the first time that we've seen this happen. Just three months ago RetailMeNot was reporting a 37% spike in net revenue for the second quarter on a 27% increase in visits. That was a closely watched report because Google's algorithm update took place mid-quarter, but now investors will start fretting about RetailMeNot's ability to not only increase its traffic but to nip the average revenue per visit deceleration in the bud.
Coupons.com -- another busted IPO since going public at $16 in March -- reports after Tuesday's market close. The providers of Web-based coupons and codes continue to be discounted themselves, but it's also up to them to earn their potential turnarounds.
