Groupon CEO Andrew Mason On Europe: We’re Too Pricey, We’re Missing Tech Mojo, And No One Knows Us

Next Story

People Get Pissed Off About OpenStack And That’s Why It Will Survive

There was once probably a good reason for why Groupon needed to expand aggressively internationally when it did, buying up other daily deal operations, for fast, inorganic growth. But on today’s Q2 earnings call, those reasons didn’t really come up, with CEO Andrew Mason instead providing a lengthy explanation for why international, led by Europe, hasn’t been peforming very well for the company — growing by 31% while North America grew at twice that rate to 66%.

The reasons, Mason said, were threefold: in Europe (the bulk of Groupon’s intl business) the Groupon offers were too expensive for consumers; merchants weren’t as happy with the service; and because of integration issues, Groupon hasn’t been able to implement some of the technology it has developed to lure in more users. But on a wider level, he also noted that people on the street in Europe still don’t have much of a clue of what Groupon actually is.

Pricing. Mason noted that Groupon deals, and their prices, were being pitched at a level higher than in the U.S., and that this hasn’t matched up with how consumers are spending money at the moment in the region. (Pricing and current buying behavior was something also raised by Apple when it was explaining its muted performance in the region.)

Merchants. Businesses, meanwhile, seem to be facing a knock-on effect from those high prices. They’re finding that their products aren’t being purchased as quickly as before, or as Mason put it: “merchants simply weren’t seeing the same value as they are in the U.S.” This is making them disgruntled, so much so that in surveys Groupon receives satisfaction ratings that are 25% lower in Europe than it does in the U.S., he noted. Mason didn’t mention it on the call, but the regulatory investigations in countries like the UK, which pinpointed areas where Groupon needed to improve its communications with merchants (which it did), may have also had an impact on satisfaction rating.s

Tech. The third issue Mason cited was technology, specifically that Groupon hasn’t been “leveraging [its] technology in Europe.” What does that mean, exactly? Groupon doesn’t have as big a bag of tricks at its disposal to counterbalance the inevitable fact that eventually the novelty of basic daily deals will wear off. Deal personalization, for example, is “still in the early stages” in Europe. Similarly, the company’s mobile offerings are not as advanced, and the “deal bank” for searchable, unused deals that Groupon has developed are also on the slow train to the old world.

From the call, it sounded like the main reason Groupon hasn’t been rolling out this newer technology is because it can’t: different operations use different platforms, and integrating them has been a long process.

“We have different technology around the world, and we have a goal to integrate these, but anyone with a history of a project like that knows it’s not a one-quarter change,” said Mason.

Perhaps worryingly, the timeline for when this might happen is a little vague: “It would be foolish to speculate on how long the completion of that process will take,” he added. Meanwhile, Groupon continues to make gradual progress, with services like the deal bank getting introduced in Europe later this year.

There are other investments being made, too. Groupon last week announced a new global head of sales, Kal Raman, putting into place a key part of the management puzzle post the departure of the Samwer brothers (in place because of their connection to Citydeal, the Groupon acquisition that now forms the backbone of its European business). Mason also said that the company is shifting R&D resources to better service Europe.

But even while Groupon is addressing some of the tech, product and pricing gaps in Europe, it’s facing another issue that Mason mentioned anecdotally: the average person on the street doesn’t seem to know what Groupon is. “When our business developement people came over here to the U.S. they were surprised that the average person knew Groupon,” he said. That kind of instant awareness hasn’t hit Europe yet.

All of this leaves Groupon, at the moment, in a position that is the opposite of Facebook’s: Groupon still makes more revenues outside North America than it does within it (in Q2: $308 million for international; $260 million for N.A. on a total customer base of 38 million users) but U.S. growth at 66% is coming in more quickly than International and at this rate will overtake Europe in a couple of quarters.

Our report on Groupon’s earnings is here.