May 7, 2012 / 2:12 PM / in 6 years

Groupon touts local commerce platform in letter

(Reuters) - Groupon Inc Chief Executive Andrew Mason explained the daily deal company’s plans to build a broad local-commerce platform, sending the company’s shares up as much as 8 percent on Monday.

Employees and guests of Groupon ring the opening bell in celebration of the company's IPO at the Nasdaq Market in New York November 4, 2011. REUTERS/Brendan McDermid/Files

Mason said in a letter to shareholders that the company is trying to make its emails and deals more relevant to consumers, while offering new tools to help merchants organize their offers better and track results.

“They know that there’s a limit to the daily deals business,” said Sameet Sinha, an analyst at B. Riley & Company. “If they want to keep growing, they need to provide a lot more tools for merchants to show them the efficacy of these deals.”

Sinha upgraded Groupon shares to neutral from sell on Monday. The stock was up 5 percent to $10.47 in afternoon trading, after gaining as much as 8 percent to $10.72 earlier on Monday.

Mason’s update comes after a slump of about 50 percent in Groupon shares so far this year. The company recently revised fourth-quarter results, admitting to “material weakness” in its financial statements. Late last month, it appointed two new board directors to stave off criticism of its accounting practices.

The company sold more than 170 million Groupons to more than 33 million active customers by the end of 2011, the CEO noted in the Monday letter.

Groupon’s SmartDeals initiative, which aims to make its daily deals more relevant to subscribers, has gained some early traction, Mason said.

In markets with high deal density such as Chicago, emails sent using SmartDeals have a 50 percent higher purchase rate, the CEO said in the letter.

Mason also said Groupon was targeting a broad international roll-out of SmartDeals by the end of the year.

Groupon Rewards, a loyalty program that the company is testing in some cities, is also seeing some early success. During the past two months, about 30 percent of eligible daily deal merchants in those cities have signed up for the program, the CEO said.

“As part of Rewards, we are also providing merchants with deep payment analytics to assess the profitability of their Groupon campaigns,” Mason wrote. “Though the preliminary dataset is small, pilot results show that Groupon Rewards customers are more loyal than other customers.”

Reporting by Alistair Barr in San Francisco and Jennifer Saba in New York; Editing by Maureen Bavdek and Tim Dobbyn

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