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Groupon is expected to report its fiscal second-quarter Monday. Groupon is coming off a better-than-expected first fiscal quarter, but its otherwise disappointing performance since going public in November has sent its stock price tumbling. (Charles Rex Arbogast/AP)
Groupon is expected to report its fiscal second-quarter Monday. Groupon is coming off a better-than-expected first fiscal quarter, but its otherwise disappointing performance since going public in November has sent its stock price tumbling. (Charles Rex Arbogast/AP)

Lookahead: Technology

Groupon has much to prove and even more to lose Add to ...

Battling hundreds of competitors and facing some deeply skeptical investors, the world’s most popular online coupons company will report its quarterly earnings on Monday.

Groupon, perhaps the best-known name in the fast-growing area of daily deals websites – where consumers receive daily notifications of significantly discounted products and services from local businesses – is expected to report its fiscal second-quarter earnings after market close on Monday. Groupon is coming off a better-than-expected first fiscal quarter, but its otherwise disappointing performance since going public in November has sent its stock price tumbling. After reaching a high of about $26 (U.S.) shortly after hitting the NASDAQ in November of 2011, Groupon’s stock price has steadily declined, and hovers around $7.40.

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The fall from grace is particularly stark given that, less than two years ago, Groupon was one of the most sought-after private companies in the tech world. In late 2010, Google put forward a massive $6-billion bid to purchase Groupon outright, but the company declined, opting instead to file for an Initial Public Offering. Today, Groupon’s market value is less than $5-billion.

Essentially, Groupon makes money by convincing businesses to let it offer its users hugely discounted products and services. In exchange, the business receives a massive influx of Groupon users, some of who will, presumably, continue to frequent the business in the future, purchasing non-discounted items. Groupon makes money by taking a cut of the group-discount transactions. But many users and businesses have raised complaints about the model. Shoppers, who descend on a business in droves to cash in their coupons, often find that business swamped, and the quality of service low as a result.

Such problems are not unique to Groupon – almost every daily deals service operates in the same way. But therein lies Groupon’s other problem. The company has little in the way of proprietary technology, and because setting up a daily deals website is far less complicated than most other technology start-ups, the company has seen hundreds of competitors pop up in recent years.

Some of Groupon’s recent wounds have been self-inflicted. A year ago, investors and analysts raised concerns that Groupon was using non-standard accounting metrics that showed the company’s numbers in a more positive light.

Groupon has managed to show solid revenue and user growth, giving analysts hope it may have turned things around after a bumpy start. And given the company’s history, simply meeting earnings expectations and refraining from another accounting controversy could be enough to convince investors to give Groupon a pass.

Follow on Twitter: @omarelakkad

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