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Inside Groupon’s Swelling Marketing Budget

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Apr. 5 2018, Updated 10:32 a.m. ET

Stabilizing international profitability

How is marketing investment affecting Groupon’s (GRPN) performance? Recently, Groupon has been investing significantly in marketing activities, where its initiatives have combined online and offline campaigns.

A lot of Groupon’s marketing investments have been geared toward drawing more shoppers to the platform and driving new product and solution uptake. The company is also investing in marketing initiatives aimed at turning around and stabilizing its international business, especially with regards to improving profitability.

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Over 14% of annual revenue spent on marketing

Groupon gained 200,000 active international customers in 4Q17, leading to its international gross profit growing 21% YoY (year-over-year) to $121.9 million. The company said the positive international performance was supported by the execution of product development, inventory, and marketing initiatives.

Marketing spending is a big piece of Groupon’s operating expenses. In 2017, for instance, its marketing expenses rose 14% YoY (year-over-year) to $400.1 million and represented 30.7% of its operating expenses. Groupon spent more than 14% of its revenue in 2017 on marketing activities.

Groupon’s marketing budget has also been on the rise, with marketing expenses increasing 24% YoY to $112.5 million in 4Q17. Marketing expenses rose 20% YoY in 3Q17 and 12% YoY in 4Q16.

Competition driving up marketing spending

Generally, e-commerce companies are investing in marketing activities to drive brand loyalty and sales amid growing competition for online shoppers. In 4Q17, marketing expenses increased 13.3% YoY at eBay (EBAY), 36% YoY at Amazon (AMZN), 88.9% YoY at Alibaba (BABA), and 35% YoY at JD.com (JD).

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