Groupon plans to reduce how much it spends gaining new customers. The company has faced criticism from potential investors about subscriber acquisition costs from potential investors. In its original IPO filing, Groupon buried those costs under an unusual accounting metric called adjusted consolidated segment operating income (ASCOI). It dropped that metric in an amended IPO filing in August. This looks to be an attempt to explain why it included it in the first place. The news came in Groupon's fourth amendment to its S-1 IPO filing, which came out this morning. Here's the new part, which comes under "Factors Affecting Our Performance", "Subscriber Acquisition Costs": Over time, we believe we will reach the conclusion that the resources presently being devoted to online marketing initiatives are not yielding sufficiently attractive investment returns due to a variety of factors such as changes in subscriber economics, achievement of subscriber saturation levels in various markets or a determination that subscriber growth objectives can be satisfied though alternative means. As a result of such factors, we anticipate significantly decreasing the amount of such investments. We do not believe that this decrease in our online marketing initiatives will adversely impact our ongoing business with existing customers or subscribers as the related expenses are not designed to drive transactions with such customers and subscribers.
Emphasis ours. It's an interesting argument. Basically, Groupon is saying that daily deals is a scale game -- and it's investing a lot up front to make sure it gets to scale first. Eventually as "saturation levels" are reached, there should be a shakeout in daily deals sites -- indeed, it's already happening -- and Groupon won't have to spend so much on acquisition. In other words: don't look at the business today, look at where Groupon thinks the business will be in a year or two. Groupon has already amended its IPO filing three times: in June it changed how it talked about its losses, in August it eliminated a the questionable accounting metric ASCOI and revealed other new information about its underwriters, and last month disclosed a memo from CEO Andrew Mason to employees that challenged some criticisms about the company (that memo had leaked to the press, raising questions with the SEC). Please follow SAI on Twitter and Facebook. Join the conversation about this story » See Also: