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Earlier today, Groupon released its first quarter 2012 performance. The company beat expectations, and the market responded in kind with the stock soaring over 15% in after-hours trading, adding to a 19% gain during market hours.

The most surprising detail was that Groupon’s take rate, or merchant commission, actually increased.  Many predicted Groupon’s merchant split to shrink given to their fiercely competitive, no barrier market, and the huge success of their low-margin Goods product.

Nevertheless, Groupon has expanded take rate by over 10% in two quarters, from 37% in Q3 2011 to 41% in Q1 2012.

How could this be possible?

Groupon Goods is potentially more profitable than everyone thinks

Based on our proprietary data, Groupon Goods now represents 10% of the company’s North American business, up from 6% just last quarter. Groupon’s massive distribution and ability to instantly monetize large quantities of unused inventory may have given Groupon more negotiating leverage, and take rate, than everyone assumed.

Update (05/16/2012):

Following this publication of this post, Groupon filed its complete 10-Q, which provides more detail on how the company accounts for Groupon Goods.

“The Company evaluates whether it is appropriate to record the gross amount of its goods sales and related costs or the amount earned. For goods revenue transactions where the Company is selling a product, revenue is recorded gross. The Company is the primary obligor in these transactions, is subject to inventory risk and has latitude in establishing prices.”

Get access to Yipit’s proprietary data

Yipit tracks the global performance of Groupon, LivingSocial, Travelzoo, Google Offers, Amazon Local and hundreds of other daily deal sites. Yipit licenses its data to leading investors and daily deal companies to provide real-time updates of market and player performance. To access Yipit’s data contact data@yipit.com.

Sean Spielberg is an analyst for Yipit Data, which provides estimates of Daily Deal Industry performance based on proprietary deal-tracking technology, rigorous testing of historical data, and industry insight.

Last Thursday, Amazon’s quarterly filing revealed that LivingSocial grew 170% over the first quarter in 2011. Annual growth for the #2 player is not surprising given industry’s rapid expansion last year – the bigger question is the company’s recent performance as investors have begun to question the sustainability of the overall industry.

New data from our March 2012 Industry Report shows LivingSocial’s North American gross billings are accelerating – up 15% in Q1 2012 from Q4 2011, after an increase of only 6% the previous quarter.

This trend is even more apparent when taking a closer look over the last six months.

Excluding January, when the overall industry experienced a sizeable seasonality dip, LivingSocial’s rate of growth had steadily climbed to 21% in February and then held relatively steady at 17% in March.

LivingSocial Escapes leads performance

LivingSocial Escapes, the company’s travel product, continues to represent an increasing proportion of the LivingSocial’s North American business.

Escapes grew 31% in Q1 2012 to $38 million in gross billings from $29 million in gross billings in Q4 2011. Escapes now contributes 20% of LivingSocial’s North American gross billings, up from 17% and 13% in Q4 2011 and Q3 2011, respectively.

While the Local / National Deals segment is representing a decreasing proportion of overall gross billings, it, too, continues to grow healthily. In Q1, the Local / National Deals segment increased 12% from Q4 – this was spurred by a strong March, where it spiked 19% from February.

Increasing deals offered while maintaining billings per deal

LivingSocial’s improving performance comes as it significantly ramps up the number of deals it is offering. This change in strategy is visible directly on LivingSocial’s site – consumers are no longer showed just a featured deal, but also more than a dozen available deals, depending on the city.

LivingSocial now defaults users to viewing all of the day’s available deals

In Q1, the number of deals LivingSocial offered increased 15% from Q4 2011 to over 21,000 in North America. This is after the number of deals offered increased 21% from Q3 2011 to Q4 2011.

Despite these steady and significant increases in LivingSocial’s number of deals offered, gross billings per deal have not been adversely impacted. Gross billings per deal were more or less flat from Q4 2011 to Q1 2012.

Essentially, LivingSocial has been able to show its subscribers more deals and have them respond by spending at similar rates, and more overall. While this is a battle of diminishing returns, there isn’t a sign of a slowdown just yet.

Potential of new products

Both Groupon and LivingSocial have launched dozens of new product initiatives over the last couple of years, and while some clearly haven’t gained traction, LivingSocial appears to be investing heavily in two:

• 918 F Street: LivingSocial created an events and experiences center in Washington DC to host its own curated offerings. Though there are clearly many fundamental questions with the economics and scaling of such an offering, LivingSocial wants to be able to offer the best merchants in Washington DC opportunities to host supply-unconstrained experiences.
• Takeout and Delivery: Delving into the space where Seamless and GrubHub currently play, LivingSocial is offering its own Takeout and Delivery product to replace its Instant Deals product.

The original daily deal product was created to spur consumer demand for merchants to address wasted inventory. These two newer products apparently have been created to help top merchants address relatively fixed supply constraints (retail locations, tables, etc.). 918 F provides the supply a merchant would need to offer its ideal experience. Similarly, Takeout and Delivery eliminates the constraints of fixed supply altogether.

Ecommerce goods offers potential upside

Despite the potential of these newer products, LivingSocial has yet to roll out a dedicated consumer goods product in North America. The introduction of consumer products to daily deals has fueled not only much of the industry’s international growth, but of Groupon’s North American growth – Groupon Goods already represents over 10% of Groupon’s total North American business.

Growth in LivingSocial’s core business, as well as the prospects of additional product lines, paints a brighter picture for the daily deal industry’s #2 player, and, potentially, the industry as a whole.

Get access to Yipit’s proprietary data

Yipit tracks the global performance of Groupon, LivingSocial, Travelzoo, Google Offers, Amazon Local and hundreds of other daily deal sites. Yipit licenses its data to leading investors and daily deal companies to provide real-time updates of market and player performance. To access Yipit’s data contact data@yipit.com.

Unaiz Kabani manages Yipit Data, which provides past offer detail and competitive intelligence to the daily deal industry and investors.

Yipit will be participating in the foremost Daily Deal conference again this year.

Vin will be giving the keynote The Next Big Step for Daily Deals where he’ll outline the state of play, and more importantly, what’s to come.

I will be moderating the opening State of the Industry panel – discussing with our panelists a broad range of topics like cohorts, user acquisition costs, statement credit, merchant take rates, Travel and Products.

Key members of our Yipit Data team will also be attending, so feel free to stop by our table for discussions on Groupon, Travelzoo and overall industry trends.

Join us next week:

Daily Deal Summit East
Crowne Plaza Times Square
New York City
April 17-18
Tickets are limited, register now

Jim Moran is co-founder of Yipit, the leading daily deal aggregator and provider of daily deal data. 

Are you a college student from a top university who aspires to be an entrepreneur?

Then intern this summer with Yipit, one of the fastest growing tech startups in New York and backed by blue-chip VCs.

Building a successful startup is incredibly challenging and the best way to learn how is to work at one.

This rare opportunity will give you exposure to what it takes to start and scale a company of your own.

You will see all aspects of our business and no two days will be the same. If you had started a week ago, here are some of the things you would have already done:

• Strategically created content for our city SEO landing pages with the goal of improving our organic search rankings for keywords people search in Google that are relevant to our business
• Organized a meetup at our office for 100 members of the Django programming community in NYC
• Researched and reached out to 20 people who you think could be a good fit for our team
• Met an active user of our product to get detailed feedback on recent user interface changes we made
• Grabbed coffee with your peer from another top startup to share operational best practices
• Pulled reports from dozens of websites to estimate revenue generated from a new feature
• Attended a class by one of our founders on how to go from idea to venture funded startup
• Created a list of 100 potential partners for a new business development initiative
• Learned anything you wanted to about other parts of the business

As you can see, the workflow is highly varied and often intense. Some of your tasks will not be glamorous while others will be incredibly stimulating. You will be provided substantial responsibility and be mentored by the members of our business team. By the end of the summer, you will have developed the skills and relationships needed to start a company of your own.

Requirements:

• Smart
• Hard worker
• Detail oriented
• Intense desire to learn how to build a business

Perks:

• Competitive salary
• Work in the center of New York’s fast-growing tech community in Union Square
• Work on one of the hottest and most lucrative sectors on the web: social-commerce
• We are all super nice, friendly and supportive of each other. No jerks

Please email us at jobs@yipit.com if you are interested. Please tell us just a little about your background, and send us your resume and links to your web presence. Given the nature of this position, it will be very competitive but we will take a serious look at everyones submission and get back to you quickly if you are a good fit.

Are you a recent grad in a banking or consulting analyst program who wants to start your own company one day?

So were the founders of Yipit, which is one of the fastest growing tech startups in New York and just raised a $6 million Series B round from blue-chip VCs.

Building a successful startup is incredibly challenging and the best way to learn how is to work at one.

We’re offering a rare analyst role that will give you the following skills:

• Domain Expertise: We’re building the Nielsen of the local e-commerce space, which will be a multi-billion – if not a multi-trillion – dollar industry over the next decade as local spending shifts from offline to online. The person who fills this role will become one of the most knowledgeable people in the world on this massive and rapidly growing industry.
• PR: Become a recognized industry expert and develop relationships with reporters from leading publications as you publish data-driven industry reports to raise the visibility of Yipit. Your ability to derive meaningful insights from our large dataset will be critical.
• Sales: Sell into hedge fund and daily deal clients by leveraging your intellect, expertise and Wall Street credibility.
• Customer and Product Development: Work with clients to refine current offerings and develop new product lines to fit their needs. Analyze market demand to determine optimal pricing for new products.
• Operations: Build out Yipit Data’s business operations and financial processes as we scale to a world class operation.

This is an analyst role supporting the buildout of all parts of the Yipit Data business. Yipit Data utilizes Yipit’s proprietary dataset to provide analytics and insights to daily deal space and investor communities. We’re already the leading source of industry data and our current clients include multi-billion dollar hedge funds and leading daily deal sites.

The workload is highly varied and will often be incredibly demanding. Ideal candidates are likely an analyst at a leading investment bank, consultancy (or similar) and can demonstrate they are:

• Intellectually and professionally nimble: able to take on a variety of independent workstreams
• Creative and comfortable with data: leverage the broad and semi-structured universe of daily deal data to derive news and investment worthy conclusions
• An extremely hard worker: ready to make the success of this startup the primary focus of your life

Compensation includes equity, highly competitive salary and excellent benefits (health, vision and dental).

As you can see, the position will appeal to a narrow and exceptional set of individuals. Interested candidates should send their resume or LinkedIn to jobs+analyst@yipit.com. Given the nature of this position, we expect it to be very competitive, but we promise to look at every individual and get back to you quickly.

Groupon grew 6% in November, outpacing the broader North American Daily Deal industry

Groupon benefited from record performance in its travel and consumer products segments early in November, while LivingSocial saw a 5% decline during the month

The Thanksgiving Holiday led to significant declines for all major players towards the end of November

Thanksgiving Holiday Slows Industry Growth

November’s Yipit Data Report reveals the North American Daily Deal industry, adversely affected by seasonal factors related to the Thanksgiving holiday, experienced marginal growth in November – industry gross billings grew an estimated 2% from October. 

Groupon Outperforms Broader Daily Deal Industry

Groupon outpaced the industry in November, growing 6% during the month. Groupon generated $154 million in North American gross billings in November, up from $145 million in October.

Groupon experienced significant weakness due to the Thanksgiving holiday – it was down 46% in gross billings during the fourth week of November, relative to the month’s third week.

Despite this decline, Groupon’s heavy holiday deals push through “Grouponicus,” the company’s holiday deals segment, fueled strong performance earlier in the month. Groupon Getaways, the company’s travel product, and Groupon Goods, the company’s consumer goods product, both increased more than 50% in gross billings in November, each benefiting from its deals being featured through “Grouponicus.”

LivingSocial Declines 5% in November

LivingSocial experienced an estimated 5% decline in North American gross billings in November, dropping from $54 million to $52 million. LivingSocial too saw a double-digit dip during the month’s fourth week, relative to the third week of the month; however, LivingSocial did not see the same level of performance as Groupon did earlier in the month.

Email data@yipit.com to Subscribe to The Yipit Data Report

The Yipit Data Report is provided to subscribers following the end of each month. An excerpt of the November Data Report is provided below. The full report was provided to subscribers in early December and also contains:

• Groupon performance by product (Local Deals, Getaways, Goods, Live, Now!)
• Market share breakdown of the major players
• Detailed performance data for each of the key players, including LivingSocial, AmazonLocal, Travelzoo, Google Offers, and Gilt City
• Key performance indicators, such as number of deals and revenue per deal, for each of the key players
• Industry trends by category and deal price point

Follow @YipitData on Twitter for the latest industry trends and analysis by the Yipit Team.

Unaiz Kabani is an analyst for Yipit Data, which provides estimates of Daily Deal Industry performance based on proprietary deal-tracking technology, rigorous testing of historical data, and industry insight. This analysis does not contain information related to mobile-based deals (i.e. Groupon Now! or LivingSocial Instant).

Note: This post was updated on 12/12/2011. Please see the bottom of this post for more information.

While Groupon’s stock surged over 50% post-IPO, it has been stumbling as of late – currently, it is off nearly 15% from its IPO price of $20. Since its IPO, Groupon has experienced flattening gross billings growth in North America.

October’s Yipit Data Report reveals Groupon grew 2% in the first month of its fourth quarter. Groupon’s growth was driven by the company’s travel product, Groupon Getaways, which saw nearly 60% of gross billings growth.

Groupon generated $147 million in North American gross billings in October, up from $144 million in September. Getaways now constitues more than 9% of Groupon’s North American business.

Impacted by Groupon’s performance, the overall North American Daily Deal industry showed less than 1% growth in gross billings and 18% in the number of deals offered from September.

LivingSocial’s gross billings declined 8% to $55 million in the month. However, after excluding its Whole Foods deal in September, which generated $10 million of gross billings, LivingSocial’s gross billings would have grown 11% in October.

AmazonLocal jumps to become a top-three player with $6 million in gross billings in October, while Google Offers still represents less than 1% of the overall industry.

Get Access to Yipit’s Proprietary Data

An excerpt of the October Data Report is provided below. The full Monthly Data Report also contains:

• Groupon performance by product (Local Deals, Getaways, Goods, Live, Now!)
• Market share breakdown of the major players
• Detailed performance data for each of the key players, including LivingSocial, AmazonLocal, Travelzoo, Google Offers, and Gilt City
• Key performance indicators, such as number of deals and revenue per deal, for each of the key players
• Industry trends by category and deal price point

To subscribe, please visit yipit.com/data and contact the Yipit Data team at at data@yipit.com.

This post was revised based on new information related to Groupon’s purchase count reporting. For any questions, please reach out to the Yipit Data team at data@yipit.com.

Follow @YipitData on Twitter for the latest industry trends and analysis by the Yipit Team.

Unaiz Kabani is an analyst for Yipit’s Data Product, which provides past offer detail and competitive intelligence to the Daily Deal Industry.

When we first launched Yipit a year and half ago, people always asked us if we had a mobile app.

But, at the time, there were only five active deals in New York. A mobile app for five deals seemed like overkill.

Times have certainly changed for the deal industry and for us at Yipit in the last year and a half.

We recently found our 1 millionth deal, aggregated our 750th deal service and expanded to our 100th city.

In New York, for example, there are currently 203 active deals from 46 sources. You can do almost anything:

• Go out to dinner? 33 offers
• Get a massage? 6 offers
• Try Yoga? 5 offers
• Teeth Whitening? 3 offers
• Learn to play guitar, act, or fly a helicopter? There’s an offer for that

With so many offers, you can now shop your city from your desktop.

And, as of today, you can now shop your city from your phone.

Download the free Yipit iPhone app today.

Groupon is now in the second week of its IPO roadshow, where it is pitching prospective investors on the growth of its business.

Groupon’s new products are major components of its growth story. In the third quarter of 2011, Groupon expanded from offering just deals for local services to those for travel, event tickets, and consumer products with the launch of Groupon Getaways, Groupon Live, and Groupon Goods.

Slide from Groupon online roadshow via www.retailroadshow.com

New Products Driving Growth

Although the performance of Groupon Now! has been disappointing, Groupon’s other key products that launched in Q3 have done very well.

• Groupon Getaways: Getaways generated $25 million in gross billings during the quarter, and surpassed LivingSocial Escapes, formerly the leading travel deals product, in just its first full month of operation.
• Groupon Live: Groupon’s partnership with LiveNation to sell event tickets collected $9 million during the quarter.
• Groupon Goods: Groupon quietly launched Goods, offering consumer products, after the success of Groupon Products in several international markets. Goods accumulated over $2 million in gross billings in only one week of operation during the quarter, putting it on pace to be a $100 million business.

In Q3, these products collectively contributed $36 million in gross billings – that is already 9% of Groupon’s total North American gross billings after the products contributed nothing in Q2.

Slide from Groupon online roadshow via www.retailroadshow.com

Groupon highlights the importance of these products in its roadshow presentation. It indicates that while Getaways, Live, and Goods will continue to grow, so will the core local deals product.

Masking Decline in Core Local Deals

However, Groupon’s core local deals business declined in the most recent quarter. Groupon grew 8% in North American from Q2 to Q3 because of these new products, but its core local deals business actually dropped 3%. 

 If Groupon’s growing subscriber base is taken into account, the recent decline of its local deals business is even more troubling. Gross billings per subscriber for the overall business declined 14% during the quarter, while gross billings per subscriber for the core local deals business declined 22%. 

Why is Groupon’s Core Local Deal Business Declining?

There are a few reasons.

• Cannibalization: The new products are often being featured in the same emails and Groupon pages that previously only displayed local deals. There is likely an impact from the new products simply cannibalizing sales from the core local deals product.
• Seasonality: Q3 coincides with the slow summer months, when many potential customers are on vacation and less likely to be checking their email each morning. Groupon’s drop in North American gross billings in July from June was primarily the result of the July 4^th holiday weekend.
• Competition: Google and Amazon recently introduced their local deals offerings and rapidly expanded in Q3. By September, Amazon had already become the fourth-largest daily deal provider, only trailing Groupon, LivingSocial, and Travelzoo.

Can “Smart Deals” Reverse this Trend?

While Groupon initially experimented with personalization of deals late in 2010, it only recently began implementation of its new “smart deals” initiative, which attempts to better match specific deals to specific subscribers. In recent weeks, Groupon updated its user profile interface to better identify the types and locations of deals that most appeal to each specific customer.

Groupon believes that its recent efforts to better match specific subscribers with the deals they are most likely to buy will increase conversion rates and reverse the trend of declining revenue per subscriber.

The launch of Groupon Reserve, which targets higher-end subscribers by offering premium experiences, will further help Groupon segment its customer base and increase its revenue per user.

Successfully implementing such “Smart Deals” should increase Groupon’s overall share of customer wallet and help reverse the recent decline in its core local deals business.

Implications of Product Expansion

CEO Andrew Mason often points to Groupon’s huge local salesforce as one of the company’s greatest competitive advantages over potential rivals, such as Google and Amazon. As Groupon moves into product categories that do not require such an expansive local salesforce, Groupon may have fewer competitive advantages.

• Fewer competitive advantages: While Groupon dominates the local deals market and is able to use its leading position to extract higher margins, it does not yet dominate travel, tickets or general e-commerce. Groupon faces competition in these segments from successful existing companies, such as Amazon and Priceline. Going forward, it appears that Groupon will be generating an increasing percentage of its revenue from products where it faces more established competition.
• Lower commission rates: By partnering with the likes of Expedia, LiveNation, and a host of e-commerce partners, Groupon receives lower commission rates from these new products than it does from local deals. Essentially, lower-commission sales from these new products are replacing higher-commission local sales, which is why Groupon’s average commission rates are falling.
• Better operating margins: Deals from the new products are generally higher priced and, in the case of Getaways and Goods, can be distributed nationally. Groupon’s average gross billings from a Getaways deal is $95k compared to $11k for its average local deal. Therefore, sales costs as a percentage of gross billings per deal are substantially lower for these deals than for core local deals, potentially counteracting the adverse effect of lower commissions on the bottom line.

Given Groupon’s huge existing subscriber base, product and category expansion represent a great opportunity to better monetize each subscriber and increase share-of-wallet.

While Groupon will likely see continued growth from the addition of new products, prospective investors will be looking to see if increased personalization can reverse the decline in Groupon’s core local deals product.

Get Access to Yipit’s Proprietary Data

Yipit tracks the performance of Groupon, LivingSocial, Travelzoo, Google Offers, Amazon Local and hundreds of other daily deal sites. Yipit licenses its data to leading investors and daily deal companies to provide real-time updates of competitor performance. To access Yipit’s data – including information on Groupon’s October performance, please contact data@yipit.com.

Follow @YipitData on Twitter for the latest industry trends and analysis from the Yipit team. 

Unaiz Kabani is an analyst for Yipit Data, which provides past offer detail and competitive intelligence to the daily deal industry and investors.

One of the biggest complaints users have had about Groupon is that the deals can be of low quality.

Today, they’ve launched a high-end service called Groupon Reserve that should address some of those critics.

An email was sent to select subscribers in New York saying:

As a member of Reserve, you will occasionally receive exclusive offers for premium experiences, like today’s offer to Bice. Hailed by the New York Times as “the handsomest Italian restaurant in town,” Bice serves up urbane Italian cuisine in an elegant dining space.

Their first deal in New York is a $70 three-course tasting menu for two at Bice.

High-End Daily Deals

GiltCity is the largest player offering high-end daily deals. Though, more recently, LivingSocial also launched LivingSocial Gourmet, a new invitation-only, high end service offering select restaurant deals.

It’s a smart move for Groupon to offer high-end deals as a way to further segment their user base and, hopefully, increase the amount of revenue they generate per user.

Don’t Want to Wait for Reserve?

If you weren’t invited, you can actually access the New York deal here.