Swarm Mobile Acquisition Could Drive Groupon Growth

  • Groupon recently acquired in-store analytics start-up Swarm Mobile.
  • The acquisition could go a long way in increasing the merchant attractiveness and improve the targeting ability of Groupon.
  • The improved targeting abilities will increase user engagement and drive Groupon’s revenue per user leading to higher revenue growth.

Groupon acquires Swarm Mobile

Groupon (NASDAQ:GRPN) has put much less emphasis on e-mail, and is much more mobile application-centric. The business is well positioned in a world that’s driven by contextual and social interactions, in which factors like location, personal preference, and social media will drive much more buying behavior. Focus on mobile, clubbed with a fairly solid quarter are positives for the company.

Groupon’s ecosystem is heavily focused on both the user and also the business owner. As a platform that’s dedicated to small and medium business owners, Groupon event discounts have to generate immediate returns for the businesses that partake, and must also result in immediate savings for consumers. Because the company operates along a very narrow rope in which it must drive value in both directions, the company has to develop better analytics that can prove to retailers the value of Groupon.

Groupon merchant impact report
Source: Groupon

The company uses estimates to determine how much a Groupon event generates for merchants in terms of new customers acquisition, and the amount that consumer has been upsold from the original Groupon amount. Admittedly, the method probably doesn’t track purchasing behavior as closely, which is why Groupon went ahead and acquired Swarm Mobile.

Quoted from Tech Crunch post on Swarm mobile  acquisition:

Meanwhile, Swarm (not to be confused with Foursquare’s similarly-named app) uses in-store WiFi, Bluetooth, and infrared technology to track user behavior and deliver targeted promotions on smartphones.

The implications of what this acquisition could do for Groupon is quite significant, and while the business has been able to attract merchants to its platform without such advanced analytics, the new information will increase its attractiveness to merchants. The company will have more conclusive information on shopping patterns following a Groupon event, in which it can communicate to merchants the residual revenue that came as a result of the group discount event. After all tracking real-world buying behavior trumps any other statistical method, and provides a much deeper look into the individual’s behavior in relation to aggregated data points.

Also, better data can lead to Groupon marketing group discounts to customers that may be more receptive to certain discounts over others. Conversion metrics, and the like will most likely improve, which will result in higher satisfaction from merchants, and more relevant discount offers to users of the service. This should directly result in higher engagement rates, and assuming engagement levels will improve, the company will generate more revenue per user, and attract more users to its application. With more users, cross-selling opportunities into both its daily deals on goods, and travel packages will transpire, which could drive Groupon revenue and earnings.

Therefore, the recent acquisition of Swarm can be interpreted positively, and while the company did not quantify the terms of the deal, the implications of it should drive meaningful accretion to Groupon earnings over the foreseeable future. Therefore, Groupon remains a compelling growth story worth following, and I continue to reiterate my buy recommendation on the stock.

EDIT: The views expressed in the article are of individual authors and are not necessarily supported by Amigobulls.

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