Daily deals provider Groupon Inc. (GRPN) and Boston-based marketing services provider Fiksu recently expanded their 3-year old relationship. The companies signed an extended partnership deal, which will allow Fiksu to exclusively market Groupon’s mobile applications worldwide.
Per the latest agreement, Fiksu will use its Mobile App Marketing platform to market Groupon mobile app in the under penetrated regions of Europe, Middle East and Africa (“EMEA”) and Asia-Pacific (“APAC). Currently, Fiksu provides services to Groupon in North America only.
Fiksu’s marketing platform uses technology that analyzes user data collected from different sources, including mobile ad networks, real-time bidding exchanges and social networks such as Facebook (FB). This thorough analysis helps advertisers to target the right audience at significantly lower costs (one-third of traditional providers), which improves their return on investment (“ROI”).
The partnership with Fiksu has been beneficial for Groupon as it boosted mobile traffic significantly in the past 3 years. This is evident from the fact that at the end of the first quarter, 45.0% of the transactions in North America were carried out through mobile devices, which increased from 30% in the year-ago quarter.
Moreover, more than 7 million people downloaded Groupon’s mobile apps during the quarter, which led to a robust mobile business. North American revenues were up 42.3% year over year to $339.6 million in the first quarter of 2013.
We believe that the extended partnership will boost international traffic, which is expected to drive Groupon’s customer base as well as top-line growth going forward. For the second quarter of 2013, Groupon forecasts revenues to increase in the range of $575.0 million to $625.0 million and operating income in the range of $20.0 million to $40.0 million.
Currently, Groupon expects to spend $15 million–$30 million to drive new customer growth and overall customer engagement in the second quarter. We believe that Fiksu’s low cost platform will lower advertisement expenditure, which will boost profitability going forward.
However, we believe that the market is getting more competitive due to the growing interest from technology stalwarts such as eBay (EBAY) and Amazon (AMZN). Moreover, a volatile macroeconomic environment and continued investments to expand its merchant base are expected to impact results in the near term.
Currently, Groupon carries a Zacks Rank #3 (Hold).
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