It contains some bad news.
Groupon’s “pool” of North American merchants – basically, the merchants it currently has “standard” contracts with – actually declined in the second quarter of this year.
Here’s how Groupon defines its “merchant pool” in the filing:
Our standard contractual arrangements grant us the exclusive right to feature deals for a merchant’s products and services for a limited time period and provide us with the discretion as to whether or not to offer the deal during such period. Our merchant pool represents the number of committed deals that we have discretion to run at any time.
It went from 20,233 in Q1 to 20,041 in Q2. Previously, this pool has otherwise shown incredibly growth throughout Groupon’s history.
We take this as a sign of competition and possibly margin compression. At the very least it shows that the era of low-hanging fruit is over.
A source in the daily deal space (not Vin Vacanti, whom we’re trying to reach) offered this analysis:
- “It shows Groupon’s decreasing leverage in the daily deal business: why would anyone sign up for exclusivity with an exploding number of options, from Google to LivingSocial to the proliferation of publishers like Daily Candy, Thrillist and Edmunds?”
- “That, in turn, should result in lower rev shares for Groupon.”
- “However, if the future of their business is location-based, always-on deals (groupon now), then it doesn’t matter as much.”
- “The challenge is that Google, in particular, has a big advantage in that biz, so it could signal that go’s economics have peaked unless go executes particularly well.”
Here’s a chart from the S-1:
It should be noted that Groupon’s international pool of merchants continued to grow at a breakneck pace.