

Groupon IPO: The Silver Lining - atopiler
http://www.venturebent.com/2011/08/groupon-ipo-the-silver-lining/

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JacobAldridge
If indeed it comes down to the lifetime value of a subscriber, assessing the
viability of Groupon is difficult when the company is so young and growing so
fast.

Given that difficulty, the key metric I would want to know is:

Acqusition Cost - (Conversion Rate to Buying a Groupon x Avg Groupon Cost x
Avg Groupon % Split)

(eg, $5 - (25% x $20 x 50%) = +$2.50

If the end result is a negative, it means, on an overall average, Acquisitions
pay for themselves with the first Groupon they buy. Get that outcome, and any
further lifetime purchases are cream.

If (as I assume it currently is) the answer to that is a positive number (like
my example) then they need repeat purchases. You need to add % Repeat to the
formula - not an easy number to know, given (as noted above) how young the
company is and how fast they're growing.

Groupon are obviously optimistic, hence the ACSOI figure which is predicated
on the assumption that subscribers will stay loyal, make repeat purchases, and
so marketing costs will significantly drop in the future.

And obviously lowering subscriber acquisition costs is also important - the
figures in the OP showed these were down by almost 10%, which takes the result
of my metric closer to the desirable $0 and below.

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imjk
I can almost guarantee that number is positive and % Repeat is something they
closely monitor and consider in their internal equationss. As any direct
response/lead gen marketer knows, customer retention rates/repeat buyer % is a
crucial element in the formula. I suspect they have a very clear idea of what
this rate is right now, and as their business grows, this number only gets
more accurate. Right now, operating costs aside, they only need to get their
lifetime value per customer above $5.75 in North America, which isn't entirely
unfathomable.

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atopiler
I think you're right that they track this very closely internally. You hit the
nail on the head with LTV - with the amount they spent to acquire what they
already have, the outlook for clearing that LTV hurdle doesn't look that bad.

