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Will Groupon Thrive Or Tank In Q4? This Chart Holds The Key (GRPN)

Source: http://www.businessinsider.com/this-chart-tells-you-whether-groupon-will-thrive-or-tank-in-q4-2011-12


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Groupon’s Q4 2011 couldn’t be more crucial: Will it see the revenue bump it needs from holiday shoppers to justify its business model? Or will sales collapse following CEO Andrew Mason’s promised pullback on marketing and customer acquisition spending?

The Wall Street Journal reports that gross billings at the company rose just 1.5 percent from September to October, and not 22 percent as previously estimated.

Has the company reached a plateau before falling of a cliff? Or is it merely taking a pre-Thanksgiving breather before continuing its climb up the Christmas sales ladder?

The company could go either way. Until recently, the company has been dependent on a cash float (and the money it raised in its IPO, of course) to stay in business. Groupon generally makes a loss each quarter. It funds its operations by taking revenues from customers’ credit cards immediately and then delaying for 30 days or so the share of those sales it owes to the merchants who made the offers. As long as there is a greater amount of new money coming in than old money owed, Groupon continues to function.

But what happens if Groupon enters a period in which its revenues decline? At most companies that isn’t too problematic — management can cut expenses to remain profitable. But at Groupon the company’s marketing and customer acquisition expenses are closely related to its revenues. It is not at all clear whether Groupon’s revenues will continue to rise if Mason cuts costs. ! Here’s a chart showing Groupon’s net revenues plotted against its total operating expenses:

groupon

As you can see, in Q3 Mason pulled back on expenses (the green line) in hopes of seeing a profit, but revenue growth (the red line) began to lose steam. The WSJ report suggests it hasn’t regained momentum since, but the October sales period doesn’t include the Christmas run-up.

In Q4, this chart is all you will need to understand whether Groupon can mature into a business that isn’t funded by stock sales. If Mason can get the red line above the green line, or if he can keep the red line moving upward, then he should be congratulated.

If he cannot, then the company — and its investors — will need to do some serious thinking about whether their daily deal business model is viable or not.

SEE ALSO: Groupon Allegedly Hacked Merchant’s Email To Alter Contract

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Monday, December 12th, 2011 news No Comments

Occasions and Holidays Drive Movie Box Office Sales, Not Advertising

Taking the top box office results for each of 52 weekends from the past 10 complete years (1998 – 2008; Source: IMDB.com) we see consistently that occasions like Valentines, Memorial Day, July 4th, and Thanksgiving show increased movie going activity. People have more time during these holidays to go to the movies and Valentines is a date+movie occasion. Also, during the summer, many people go to the movie theatre to escape the heat so there is an overall hump every year during the summer months — from Memorial Day to Labor Day.

movie-box-office-2


People go out during Valentines, Memorial Day, July 4th, and Thanksgiving. And they still spend what they planned to spend — 2 tickets for movie — they didn’t buy 2 more tickets and see a second movie on the same date or holiday weekend.  If they had several good movies to choose from (often, they don’t), they would choose to spend the finite dollars on the one movie they really wanted to see. The overall movie spending “pie” did not increase much, if any, year over year.

1998 $4,055,194,733 n/a

1999 $4,253,601,768 5%

2000 $4,496,554,005 6%

2001 $5,003,433,737 11%

2002 $5,489,974,199 10%

2003 $5,581,797,720 2%

2004 $ 5,697,299,530 2%

2005 $ 5,524,566,579 -3%

2006 $ 5,660,826,625 +2%

2007 $ 5,968,027,963 +5%

2008 $ 5,887,193,490 -1%

The chart below shows a red line which is the average of all 10 years. The 10 thin blue lines are the annual lines from1998 – 2008, inclusive and these are plotted as actual dollars. They come out right on top of each other.

movie-box-office-2-overlay

Movie advertising, which runs into the hundreds of millions of dollars a year, has failed to noticeably increase the overall spending year-round or even during specific times. The chart below shows the differentials (difference between an annual line and the 10-yr average line). These all hover closely in the +$50M and -$50M band. The amplitude of the 10-yr average (red line) is larger than $50M in the summer hump — implying that the average change in movie ticket sales due to normal seasonality is larger than the change in amplitude caused by ALL movie advertising combined.

movie-box-2-differentials

And the summer “hump” is due to actual demand (people going out to movie theatres, some to escape the heat) not due to advertising. The only effect of advertising is to share-shift from one movie to another — the total spending remains consistent and even seasonal variations are consistent — a “zero-sum game.”


All-Time USA Box office

Source: IMDB.com

Rank Title USA Box Office
1. Titanic (1997) $600,779,824
2. The Dark Knight (2008) $533,316,061
3. Star Wars (1977) $460,935,665
4. Shrek 2 (2004) $436,471,036
5. E.T.: The Extra-Terrestrial (1982) $434,949,459
6. Star Wars: Episode I – The Phantom Menace(1999) $431,065,444
7. Pirates of the Caribbean: Dead Man’s Chest (2006) $423,032,628
8. Spider-Man (2002) $403,706,375
9. Star Wars: Episode III – Revenge of the Sith (2005) $380,262,555
10. The Lord of the Rings: The Return of the King(2003) $377,019,252
11. Spider-Man 2 (2004) $373,377,893
12. The Passion of the Christ (2004) $370,270,943
13. Transformers: Revenge of the Fallen (2009) $367,614,540
14. Jurassic Park (1993) $356,784,000
15. The Lord of the Rings: The Two Towers (2002) $340,478,898
16. Finding Nemo (2003) $339,714,367
17. Spider-Man 3 (2007) $336,530,303
18. Forrest Gump (1994) $329,691,196
19. The Lion King (1994) $328,423,001
20. Shrek the Third (2007) $320,706,665
21. Transformers (2007) $318,759,914
22. Iron Man (2008) $318,298,180
23. Harry Potter and the Sorcerer’s Stone (2001) $317,557,891
24. Indiana Jones and the Kingdom of the Crystal Skull(2008) $317,011,114
25. The Lord of the Rings: The Fellowship of the Ring(2001) $313,837,577

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Wednesday, July 22nd, 2009 digital No Comments

Dr. Augustine Fou is Digital Consigliere to marketing executives, advising them on digital strategy and Unified Marketing(tm). Dr Fou has over 17 years of in-the-trenches, hands-on experience, which enables him to provide objective, in-depth assessments of their current marketing programs and recommendations for improving business impact and ROI using digital insights.

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