SavingStar, which collects your coupon savings across multiple grocery stores and gives them to you as a lump sum, got a lump sum of its own today: A $9.1 million fourth round of funding.

As part of then new funding, it’s launching a healthy eating program in partnership with lead investor Edenred. American Express Ventures, DCM, Flybridge Capital Partners, First Round Capital, and others also participated in the round.

SavingStar works with over 200 grocery companies around the United States to create exclusive savings deals. You set up an account with SavingStar, choose the deals you wish to use, and then go shopping. The company hooks up your account to your existing loyalty cards and records all of your transactions. When you hit a deal threshold (for instance, you buy three bottles of soda and save $1), SavingStar will credit you that money, instead of taking it off of your total amount at check out.

When you’ve saved the lump sum of money you’d like to withdraw, you can either receive it through a direct bank deposit, a PayPal deposit, a gift card, or donate it to charity.

SavingStar also has mobile apps for iOS and Android you can use to track purchases, find stores, and add coupons.

Edenred and SavingStar are partnering up for a joint venture called NutriSavings, specifically focused on healthy eating in the workplace. The idea is to help companies lower health insurance costs by putting in place healthy eating programs that set objectives for healthier employees. The NutriSavings website tracks the food purchases you make and gives you a quality score on how healthy your shopping cart it. It then provides you with guidelines on how to improve that score and receive savings geared toward healthier products.

The company launched in April 2011 and is based in Waltham, Mass. It says it currently has over three million customers. SavingStar has raised a total of $27.3 million including this funding.

hat tip TechCrunch; Shopping cart image via Shutterstock

The new offers capability has been in limited release for some time. With it, advertisers can add a coupon-like discount offer to their AdWords ads, either for immediate redemption online or for printing and in-store use, and it’s now on track to roll out to all advertisers, according to Larry Kim, the CEO of search marketing company WordStream.

Source: WordStream

Example: the Google Offers Extension ad product

He’s excited about the new opportunity for advertisers.

“It’s a way better deal than Groupon, who requires 50-90 percent discounted pricing, then takes 50 percent of that for themselves,” he wrote me in an email. “Also, advertisers can track this. Local businesses can connect the dots between online marketing and in-store purchases … not possible before!”

One thing that’s not so certain but would be absolutely huge: integration with Google Maps, which would enable Google to deliver incredibly targeted, relevant, and immediately actionable advertising right to your mobile device.

“Local Deals + Google Maps = perfect match!” Kim said.

As Kim writes in a blog post on the subject, Google famously attempted to buy Groupon for $6 billion a few years ago, when Groupon was still in its ascendancy and could, seemingly, do no wrong. Now, of course, the company is not quite as hot, sporting a market value of just $3.8 billion.

Offer Extensions, well integrated into Google’s vast array of mapping, email, web search, and other properties, cannot be a good thing for the Chicago deals company. But they will be a good thing for advertisers, says Kim:

“Coupons mean more eyeballs and attention for advertisers. Even if users see your deal, save it for later, and forget about it, they’ve still interacted with your business and brand more than they might have if you didn’t put out an ad offer.”

I asked Google for a comment, and a representative said essentially that the company has been testing Offer Extensions, among other AdWords extensions, since 2010, and that advertisers using enhanced campaigns (AdWords campaigns that include information like maps, phone numbers, or more product info) now also have access to offers.

photo credit: mark knol via photopin cc

Think the group-coupon craze is nearing the end of its life cycle? Tell that to LivingSocial’s investors, who just sunk another $110 million into the online deals service.

The funding news comes from an email that was first obtained by the Washington Business Journal today, which indicates that the new round came from existing investors and was one of many options the startup had for getting additional funding.

The new round will “build our reserves, solidify our long-term plans and execute against our vision for the future,” wrote LivingSocial CEO Tim O’Shaughnessy in the message. “This investment is a tremendous vote of confidence in our business from the people who know us best, our current board members and investors.”

The new round is a bit surprising considering that the consumer demand for online-coupon services has somewhat dropped off in the last several months, not to mention the dismal earnings reported by rival coupon service Groupon. Additionally, LivingSocial saw a $650 million loss in 2012, and a $558 million loss in 2011. Back in November the company axed 10 percent of its workforce in an effort to address the slowed growth of its business.

LivingSocial declined to comment about the new funding.

VentureBeat obtained a copy of the full email message sent out today, which we’ve pasted below:

LivingSocialites -

We’ve got some great news to announce today, as many of our current investors have reinforced their support for the company through a new round of financing that will give us an additional $110 million to build our reserves, solidify our long-term plans, and execute against our vision for the future.

This investment is a tremendous vote of confidence in our business from the people who know us best, our current board members and investors. They have reviewed our plans for 2013, and they are enthusiastic enough to want to commit additional financial resources through this round. This round also follows a competitive process in which we were fortunate enough to have multiple options for funding.

As you know from our all-hands last month, we have an aggressive roadmap for profitability and expansion this year, and those plans include increased investment in areas like marketing, technologies, and mobile. This new investment round will allow us to dedicate the resources we need, while also building a significant cash reserve against unanticipated events or bumps in the road.

This new investment does not change our plans to reach profitability, and we believe that a cash-flow positive and growing company will give us even deeper resources to take advantage of new opportunities, extend our promising lines of business, and expand a robust funnel of new customers. We will be sharing regular updates on our results and progress against goals as we move forward.

We’ve had a solid start to the year, and I am excited about the opportunity to solidify our path to success over the next couple months. Thank you again for your hard work and dedication.

- Tim

For intrepid deal hunters, there’s nothing better than finding the perfect coupon code right before you click “Buy.” But finding valid coupon codes for online retailers usually requires a bit of click-work, and plenty of trial and error.

Enter Coupons at Checkout, a free browser extension from the folks at the deal site CouponFollow, that makes finding and testing coupon codes dead simple.

Once installed, the extension uses a patented process to find coupon codes when you reach the checkout page at more than 100,000 online retailers. Simply click the appropriate coupon code section of the checkout page and choose from a dropdown of known codes. The extension gives you an idea of how valid a coupon may be, and if it fails you can give feedback to warn other users.

Coupons at Checkout supports Chrome, Firefox, Safari, and Internet Explorer. And unlike those dreaded shopping toolbars, the extension is invisible until you reach an online checkout page. The company says it may occasionally launch a browser tab when you click a coupon to track usage, and it will occasionally ask for feedback.

According to its privacy policy, Coupons at Checkout analyzes and collects your browser behavior around e-commerce pages, but no identifiable information is collected. Unlike many other companies, CouponFollow is at least clear what it’s doing with your data.

Marc Mezzacca, the New York City-based creator of CouponFollow, tells me that the extension’s users saved $22.45 on average (10 percent more than just manually fishing for coupon codes),  and it takes only around 21.1 seconds to find a working code, versus 80.7 seconds manually. So far Coupons at Checkout has been downloaded more than 12,000 times.

I’ve been testing out the extension while Christmas shopping, and so far it’s saved me a decent chunk of change. While there aren’t always working coupon codes at every retailer, at least with this extension you’ll know before wasting time searching the web.

Mezzacca notes that it’s not only helpful for consumers, the extension also benefits retailers: 87 percent of surveyed users said they would be more likely to complete a purchase if they saw a coupon when they were checking out. Currently, 27 percent of customers abandon their carts to seek out coupons, and only a third of those actually return, according to a recent PayPal study. Discounts also lead consumers to become an online fan of specific brands, and they also lead consumers to reconsider purchasing unbought items.

Next up for the extension: Mezzacca wants to improve the algorithms behind validating coupons, as well as track working coupons and their expiration dates better.

Photo via sdc2027/Flickr

Facebook will soon start charging merchants to run Offers as a way to earn more revenue at a time it desperately needs it.

Facebook’s stock on the NASDAQ exchange has struggled under continuted scrutiny and concerns about declining revenue. So the company needs to come up with new ways to generate revenue from its many businesses and users. Making Offers — a service introduced in April where businesses can publish coupons or special promotions to a user’s Facebook news feed — a paid service works toward this aim.

“We think this aligns incentives nicely,” Gokul Rajaram, director of product management for Facebook’s ad and Pages businesses, told Reuters. “The best results on Facebook Offers will come from organic distribution plus paid distribution.”

Facebook also has added some new features to the Offers platform including barcode scanning and more advertising options. First up, there is the option to give a unique barcode to each user who purchases an Offer. This allows for a better way to track transactions and easier redemption at the counter. It also means Offers could potentially run on other e-commerce sites.

On the advertising side, businesses will now have to pay Facebook to run an Offer that can be seen in the News Feeds of users who like it. (This is how Facebook will actually be taking money from merchants.) There will still be a free option for businesses to run an Offer that can only been seen on their page.

Offers will also be available to Internet-only businesses instead of just folks with physical locations.

Google’s takeover of portal deals site DailyDeal about a year ago for $114 million was one of the great success stories of the German startup scene – and a very tidy outcome for founders Fabian and Ferry Heilemann (pictured above).

Now, according to our sources, Google has laid off a larger number of staff – some of them in senior positions — mainly in the areas of sales and marketing. A Google spokesman confirmed news that it will reduce the DailyDeal team and not renew certain contracts.

The deals site team, led by Graham Law and Matthew Scott Sucherman, will in future focus more on the integration of the platform with other Google products, in particular Android, Maps, Adwords, and Adwords Express. No further specific details were given, including the number of layoffs.

Daily deals – a difficult business model

Recent months have shown the daily deals and coupon industry is not a simple one to nail. In Germany, earlier this year, Marcus Seidel still achieved reasonable success with his exit of  Gutscheine.de to the RTL group. In contrast, market leader Groupon’s share price has slumped, despite promising revenue results in Q1 2012, major financier Kinnevik recently bowed out of the company, and senior executives Daniel Glasner and Phillip Magin have left for reasons unknown. The company also attracted media attention for questionable working conditions and other standards earlier this year.

It’s not just Groupon – the Global Daily Deal Association (GDDA) in June acknowledged a general “lack of merchant and consumer confidence” and is working on a code of conduct in a bid to help the industry recover.

DailyDeal – from portal to what?

DailyDeal itself has largely stayed out of the headlines since its takeover by Google. The current restructuring, however, suggests it too may be failing to perform under a business-as-usual approach. Success would seem to depend on how well Google can integrate the service into its other advertising products. It wouldn’t be the first time Google canceled a project that didn’t live up to its hype – Wave is just one example. For now, though, the company reassures that it is holding onto the daily-deal model.

This story originally appeared on VentureVillage, VentureBeat’s Germany-based syndication partner.

While the usefulness of the location sharing app Foursquare may be dubious, one thing is certain: the company has so far lacked a real revenue source.

So it’s not at all surprising (and in fact a bit heartening) to learn that Foursquare is checking in to a new venture: coupons. Foursquare CEO Dennis Crowley made the announcement in an interview with the Wall Street Journal.

Appearing in a July update of the Foursquare app, the coupons will take the form of personalized offers from local vendors, who will pay Foursquare for their placement.

The move, on the whole, makes sense. Foursquare, on the retailer end, has always been all about encouraging consumers to make repeat visits, a highly-desired thing for pretty much any business.

The plan, however, isn’t the first of its kind. Last year Foursquare announced that it was working with American Express  to offer discounts to cardholders when they checked into the locations of participating merchants.

But the company’s new plans are a bit more ambitious. With personalized coupons, it appears that Foursquare is finally nearing the point where it can monetize all the data its been collecting over the past three years. Foursquare’s 20 million users have checked in two billion times, so the company is clearly in possession of a lot of information.

But Foursquare faces some real hurdles, not the least of which is that most people are still not crazy about the idea of location sharing as a whole. That, Crowley hopes, may get better with time.

“People are still warming to the idea of location sharing. We are inventing this category, or really pushing it forward,” he told WSJ.

Crowley himself  ”lost his mobile couponing virginity” way back in 2008, before Foursquare was even launched. At the time the Crowely noted one of the biggest problems with the concept. “Mobile couponing isn’t a bad idea (I’m actually seeing it in a lot of mobile biz plans these days), its just so hard to execute because of a venue’s employees (the people behind the bar, cash register or counter),” he wrote on Flickr.

With Foursquare’s latest efforts, Crowley may have just found a way around that.

Photo via Flickr: MissMessie, Dennis Crowley

Coupon-junkies can soon skip the newspaper and instead get their fix from the News Feed — no manual clipping required.

Facebook has partially turned on its Offers program, a new initiative that lets brands and businesses disperse discounts and promotions throughout the social network. Brand fans can simply click to digitally clip the offers from their News Feeds.

Here’s how the program works: Local businesses and brands can create offers — not to be confused with deals of the Groupon variety — from their Facebook Pages, and then push those discounts out to the folks that “like” their Pages. You, the Facebook user, are greeted with offers from the Pages you “like” in your News Feed. You can click “Get Offer” to claim — a.k.a. clip — the promotion, and Facebook will follow-up with an e-mail that you’ll need to show to redeem the discount.

So say, for instance, you “like” Joe’s Java on Facebook. Should your coffee spot post a discount, like $1 off your next latte, you would find that offer in your News Feed, click the “Get Offer” button to claim it, check your e-mail, and then head off to Joe’s to present your electronic coupon. You can also share the offer with your Facebook friends.

Of course we’re talking about Facebook here, so be wary of one little catch: For every offer you claim, a story is posted to your Timeline (profile), though you can adjust the settings to limit who sees this activity.

As with any new Facebook feature, we expect a mixed reaction from Facebookers. There’s bound to be vocal group of users who hate the idea of coupons in their News Feeds, and a crowd of happy campers anxious to save a few bucks at their favorite haunts.

Facebook first announced its new Offers program in late February when it revealed its reworked advertising products. The product is in beta, meaning that only a select group of businesses can currently run offers through Facebook.

“Facebook has been rolling out Offers since fMC and it’s now available in Beta in Japan, Turkey, Australia, New Zealand, and Singapore,” a company spokesperson told VentureBeat. A handful of U.S. clients also have the ability to run offers, we’re told.

Photo credit: sdc2027/Flickr

[via The Verge]

Since nearly everyone has a smartphone these days, retailers have flocked to mobile coupon services to do away with hard-to-track paper coupons. Koupon Media just closed a $4.5 million round of funding to offer mobile coupons and analytics tracking.

There have been several attempts to get mobile coupons to catch on recently, though many have been hindered by fraud and clunky apps. Typically, to redeem a store coupon on your phone, you have to download a store app or an app such as Coupon Sherpa or Yowza. While those apps usually work fine, Koupon Media wanted to eliminate the middle man and provide a platform for retailers to send coupons to customers through Facebook, QR codes, text message, or email. The company’s hope is that because it offers several ways for a customer to get their hands on a coupon, they’re more likely to use it, spend more money in a store, and make the retailer happy.

In addition, Koupon Media provides reporting tools so business can track how well a coupon went over with customers. In order to combat fraud, the company had a $1 million fraud insurance policy, as well as a “swipe to validate” feature, coupon expiration clocks, and GPS enabled offers. Each coupon is single use only, which cuts down on fraud as well.

Koupon Media faces competition from a plethora of other mobile coupon apps, including 8coupons, Coupon Sherpa, and store-made coupon apps.

The $4 million round brings the company’s total funding to $6.5 million. Trailblazer Capital led the round, with participation from existing investors DFJ Mercury and The Matthew Pritzker Company.

Koupon Media is based in Dallas, Texas, and has offices in Chicago.

Coupon image via Shutterstock

Yowza is a mobile application that lets you scan your area for stores that offer coupons or sales. To redeem a coupon, you have the cashier to scan the bar code that pops up on your mobile phone. The app, which is available on iOS and Android, only features coupons from businesses that sign up for its monthly service. Right now, Yowza only has a few thousand businesses signed up, including FastFrame, My Gym, REI, McDonalds and a variety of local merchants. However, the number of participating businesses is expected to rise significantly in the next few months, Grunberg said.

While my commitment to professionalism prevented me from asking Grunberg if JJ Abrams is giving him a cameo in the next Star Trek movie, we did chat about why Yowza didn’t need to compete with other popular coupon and deals services.

“There is room for Foursquare, ShopKick and plenty of others. Those guys are in the gaming business as far as I’m concerned, because you have to check-in, accrue points … click like buttons, etc.,” which are all activities that the average person doesn’t have time to do to obtain a coupon, Grunberg said. “My wife and I have three kids, so when we’re at a store we want to pull up a coupon and use it. That’s it.”

That said, Yowza definitely focuses on the simplicity of pointing you to coupons and allowing you to redeem them quickly. And by focusing on being a useful way to scan for coupons rather than a way to interact with my friends, it proves very successful.

Unlike group coupon deal services like Groupon, Yowza doesn’t take a cut of the revenue from each sale. Instead, merchants sign up for the service, which costs $89 per month per location. Merchants can then add or edit any number of coupons or sales that they’d like, as well as view analytics on their customers’ coupon activity. The monthly fee can be less for merchants with a chain of national or regional stores, depending on the type of business and number of locations.

Under the current business model, Yowza isn’t far off from achieving profitability, according to CEO David Teichner. And with more people using mobile devices to save money in brick-and-mortar stores, mobile coupons have a bright future.

Founded in 2009 by Grunberg and August Trometer, Yowza’s investors include Tech Coast Angels, Pasadena Angels, and others. The company has 11 employees.

Yet another new player has just launched in the field of group buying, but this time, with a twist. The Mutual, a Brooklyn-based startup, is pitching its service as the “Groupon for Good.” Its goal is to reward buyers for donating to a suite of environmental charities. More akin to a subscription service, a buyer will “join” The Mutual for $10 a month, $8 of which goes to charity and $2 of which goes to The Mutual to support its operations and recruit new retailer “Perks.” As such, 80 percent of the cost of membership to The Mutual is indeed tax deductible.

The Mutual’s Perks will include VIP service, early access to tickets and discounts from partner businesses such as Brooklyn Brewery, uncommon goods and Zimride, which the founders hope will create an “economy for good.” 

Although the majority of The Mutual’s current Perks are for New York-based businesses, it is launching the site nationally, hoping to grow to other cities, such as San Francisco and Washington D.C., in the near future.

For the charitable side of The Mutual, founders Daniel Vallejo and Matt Pestritto have vetted 5 charities who they believe are the right blend to create the greatest collective impact on the environment. These partners include Carbonfund.org, which addresses clean air issues; Oceana, which addresses oceans management; The Trust for Public Land, which conserves land; World Resources Institute, which focuses on reform and the relationship between humans and the environment; and the Center for Ecoliteracy, which expands and improves environmental education. 

So far, The Mutual has already donated about $2,000 to its causes, from 38 individual members.

Vallejo thinks The Mutual will further what he calls “profitable activism,” which he defines as any activity that “brings the business and philanthropic worlds a little closer together in a practical way.” He knows a bit about this approach from his background at global advertising agency Ogilvy & Mather, where he started its respected sustainability practice, OgilvyEarth.

What does a business get for working with The Mutual (as opposed to Groupon or LivingSocial or Gilt Groupe even)?  On top of zero cost to participate, The Mutual takes no cut of any deal. It believes other group-buying services destroy margins and alter customer loyalty, and in addition to wanting to create incentives for more charitable giving, it would like to foster loyalty and repeat business to its retailers.

Nonprofits are happy about the potential “to help foster more consistent micro-donations and help reach a new audience,” said Chris Perceval, director of corporate relations at the World Resources Institute.  Buyers and retailers can be happy that their discounts also do good by the environment, not just by their wallets.

WhaleShark Media owns a number of online coupon sites, such as RetailMeNot, VoucherCodes.co.uk and Deals.com, covering deals on a wide range of purchases, including grocery items, clothing, domain purchases and much more. It claims to bring in over a 100 million visitors a year to those sites.

The company said it intends to use the new funding to acquire additional coupon services as well as continue growth. WhaleShark said it expects to become profitable this year and to generate over $70 million in revenue. The company makes money through commission from the sale of deals on its sites.

WhaleShark’s funding is just the latest in a string of big investments made in online coupon businesses as coupon deals from newspapers continue to decline. In October, competitor Coupons.com raised $30 million in funding, giving it a total $200 million investment. Weeks later another competitor, CouponCabin, raised a $54 million round.

Founded in 2009, Austin, Texas-based WhaleShark has raised a total of $279 million in funding to date from J.P. Morgan Asset Management, Institutional Venture Partners, Austin Ventures, Norwest Venture Partners, Adams Street Partners and Google Ventures. The company has about 140 employees in Austin and abroad in the U.K., with plans to add additional employees in the future.

I have long criticized Groupon’s accounting practices. As someone who has watched the company closely since the it first filed the paperwork to go public (now scheduled for November 4), I have seen how it has continually adjusted its S-1, often in response to withering criticism.

Analyzing Groupon has been like playing 3-card monte. I’ve managed to successfully follow the queen and track the changes in the company’s accounting. Until now. I’ve lost the queen.

Continually revised accounting

Groupon started off its reporting by claiming that marketing expenses don’t matter and that investors shouldn’t worry about them. It invented a new metric called Adjusted Consolidated Segment Operating Income. If you ignored Groupon’s marketing expenses, Groupon generated a profit of $81.6 million in the first quarter. That metric was so ridiculed that Groupon removed it in the second amendment to its S-1. When that was converted to a more normal accounting metric, Groupon actually lost $98.3 million in the quarter.

Groupon also initially reported its revenue on a gross basis, meaning that it included in its revenue the portion of a Groupon’s value that is shared with merchants. This was clearly in conflict with FASB regulations. So Groupon also abandoned that metric with the third amendment to its S-1. That change dropped Groupon’s 1Q revenue by more than half from $644.7 million to $295.5 million.

But the company’s most recent change in its accounting practices is especially troubling. Released just two weeks before its IPO, Groupon significantly changed the definition of key expense metrics such as marketing expenses, cost of revenue and selling, general and administrative (SG&A) costs. When it made these changes, Groupon did not restate the numbers for the preceding two quarters. We are just supposed to trust that Groupon is now near breakeven, right before the IPO.

At least with ACSOI and gross accounting, all of the correct information was in the S-1. Savvy investors and analysts could ignore the numbers that Groupon wanted investors to focus on and look at the right numbers. With the most recent changes, investors have no way of reasonably comparing its expenses in 3Q with expenses in 2Q and 1Q.

Groupon continues to try to get investors to focus on year-over-year numbers, but those numbers are utterly irrelevant when the company has grown as fast as it has. The quarterly numbers are the only ones that are relevant and Groupon does not provide those.

For example, based on the previous filings, we know that Groupon’s SG&A in was $178.9 million in 1Q and $273.1 million in 2Q. In the third amendment to the S-1, the combined figure for 1Q and 2Q was $407.7 million. But with the latest revision, all we know is that under the new new rules, the combined number for 1Q-3Q is $565.7 million.

Confusometrics

One of my long-standing concerns about Groupon is the extent to which the “Groupon Promise” represents a risk to investors. Under the promise, Groupon customers who are unable to redeem a Groupon or are unsatisfied with their experience can get their money back. Based on the third amendment, it was possible to estimate the percentage of Groupon’s revenue that went to refunds. I pointed out that on a percentage basis, Groupon’s cost of revenue increased more than 40 percent, from 6.8 percent of revenues in the first half of 2010 to 9.6 percent in the first half of 2011.

Sources with knowledge of Groupon’s internal numbers have told me that refund rates are increasing in line with that estimate. I specifically asked Groupon for clarity on this number. Groupon did not respond to that request.

I also gave Groupon the opportunity to comment on its accounting practices for this post. Spokeswoman Julie Mossler responded, “Rocky, we’re choosing not to work with you.” (The company is also currently in its SEC-mandated quiet period surrounding the IPO and often does not respond to media requests for legal reasons.)

After my request, Groupon again redefined the cost-of-revenue metric, including in it many other expenses that would make it hard to evaluate the impact of the Groupon Promise on the company.

If Groupon had consistently reported the expense numbers from the beginning, I wouldn’t have a problem with it. If it restated 1Q and 2Q based on the new new rules, I wouldn’t have a problem with that, either. The fact that it did neither should be a red flag to diligent investors.

In other areas, Groupon continues to hope that investors will make meaningless comparisons. For example, Groupon expresses its marketing expenses as a percentage of gross billings. What investors should really pay attention to is marketing expenses as a percentage of revenue. Groupon’s marketing expenses are 22.3% of gross billings, but 54.8% of revenues. This discrepancy will only increase as Groupon’s share of Groupon deals continues to drop.

Since the beginning, Groupon has not reported key metrics that are essential for investors to assess the health of its business. This includes email open rates (which are likely declining rapidly), churn among customers (likely increasing) and subscriber/customer acquisition costs. (In fairness, the latter number can be approximated using Groupon’s marketing expenses.)

One key number that was in previous S-1s was removed as it got worse: the percentage of each deal that Groupon gets to keep. This number dropped from 42% in 2Q to 37% in 3Q. Over time, I expect this number to drop to 15%-20%.

In other cases, Groupon reports numbers in ways that are very confusing to casual observers. I saw several news outlets report that 30 million consumers purchased Groupons in 3Q. That’s incorrect. Groupon only reports cumulative numbers of Groupon purchasers. Because it’s a cumulative number, by definition, that number can never go down. But it’s reported in the quarterly column. By my estimates, only about 17.6 million people purchased Groupons in 3Q.

Barely passing grade

Groupon is like the consistently failing student who suddenly gets barely enough questions right on the final exam to get a passing grade, without showing any of his work. By not offering restated numbers for 1Q and 2Q, Groupon is not showing its work.

It’s possible that the student was diligent and worked really hard to earn a passing grade. Or it’s possible that the student cheated. Unfortunately, it’s impossible to determine what exactly happened without a deeper audit.

But these factors are important to keep in mind:

• Since the beginning, the company has consistently tried to make its revenues seem substantially bigger than they are and tried to convince investors that its massive losses were, in fact, profits.
• In explaining the business model of Groupon to merchants, Groupon ignores one of the biggest factors that causes Groupons to be unprofitable: the percentage of Groupon customers who are already existing customers.
• Groupon co-founder and chairman Eric Lefkosky has a troubling past with other companies, according to Fortune. In one email, about Starbelly, he wrote, “Lets start having fun… lets get funky… let’s announce everything… let’s be WILDLY positive in our forecasts… lets take this thing to the extreme… if we get wacked [sic] on the ride down-who gives a shit…” Starbelly sold itself for $240 million to Ha-Lo industries, lining Lefkosky’s pockets. Ha-Lo soon went bankrupt.
• Ed Ketz, an associate professor of accounting at Penn State University, told Bloomberg West that according to a model that he ran, there’s “almost a 100% probability” of accounting fraud at Groupon.
• Ketz also pointed out that Groupon’s auditor, Ernst & Young, has not issued an audit report on Groupon’s internal controls. From Groupon’s S-1: “We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.” Two former Groupon salespeople tell me that Groupon’s systems are not robust enough to accurately track its operations. Even in the week of its IPO, Groupon has changed the definition of numbers from 2Q.
• In its roadshow video, Groupon CFO Jason Child says that the company had “over $240 million of cash on the books and no debt.” Potential investors had to rely on the accompanying slide to see that the company owes merchants who have run Groupons $466 million.

The irony is that if Groupon hadn’t tried to push through its unusual accounting measures, it might have gone public sooner and at a higher valuation.

Rocky Agrawal is an analyst focused on the intersection of local, social and mobile. He is a principal analyst at reDesign mobile. Previously, he launched local and mobile products for Microsoft and AOL. He blogs at http://blog.agrawals.org and tweets at @rakeshlobster.

Top photo: Art Prestige Studio / Shutterstock.

Related articles

• Groupon’s tricky S-1 math (venturebeat.com)
• Who gets hurt if Groupon collapses (venturebeat.com)
• Weak technology weighs down Groupon’s sinking ship (venturebeat.com)
• Groupon will IPO in 2 weeks at an $11.4B valuation (venturebeat.com)
• When Groupons are bad for small businesses (venturebeat.com)

Coupons.com may have raised $30 million just a few weeks ago, but CouponCabin has leapfrogged that with a whopping $54 million first round of funding, with the goal of expanding its offerings and the number of merchants it works with.

CouponCabin differentiates itself from other coupon sites by continuing to verify whether the coupons it offers actually still work, something its user base likely appreciates. They’re so committed to quality coupons that if a user tries to use a coupon that is no longer valid and reports it, the company will give he or she a $25 gift card. Retailers the company offers coupons for include Target, Dell, RadioShack, Best Buy, Champs Sports, Home Depot, Kohls and Kmart.

The company said the funding will go toward building up its consumer base and focus more on grocery stores and local businesses.

“Among other initiatives, this investment will enable us to grow our local, grocery and printable coupon offerings, making us the deepest and broadest consumer destination for coupons on the web,” said CouponCabin founder and CEO Scott Kluth in a statement. “This investment will also help us better engage with more than one million fans on Facebook.”

CouponCabin’s round was led by growth equity firm JMI Equity, which has also invested in online firms like DoubleClick, Adknowledge, Business.com and DoubleVerify. JMI Equity will hold a minority stake in CouponCabin thanks to the investment.

Whiting, Ind.-based CouponCabin was founded in 2003. Last year, CouponCabin generated $500 million in online retail sales for its wide range of merchants, and it claims to have saved users more than $300 million since 2003. In 2011, the company has posted more than 100,000 offers from more than 3,500 stores.

Unlike group daily deal services like Groupon, Coupons.com is focused on being a digital extension of the coupons that typically appear in print publications. The decline of print publications has allowed the 13-year-old company to continue its strategy of pushing vendors to put coupons online instead of distributing them through newspapers.

“As the coupon book in the newspaper gets thinner, it’s because it’s slowly moving to Coupons.com,” said Coupons Inc. CEO Steven Boal in an interview with VentureBeat.

The new investment will give Coupons.com access to Greylock’s resources, and the venture capital firm will also act as an important adviser, according to the company.

Previously, Coupons.com closed a $200 million round of funding to help continue its strategy of transforming the couponing industry from primarily print to digital, mobile and social platforms. The funding and guidance from Greylock will also go toward helping the company’s international expansion effort and point-of-sale integration.

Greylock has allocated up to $30 million in total capital for the investment and has invested approximately half of that to date.

Founded in 1998, the Mountain View, California-based Coupons.com has received $247 million total in funding to date. Coupons.com’s valuation is estimated at $1 billion, according to the company.

Google has been off to a somewhat slow start with its still-young Offers service, which it created after Groupon declined a $6 billion acquisition offer from Google back in late 2010. Google Offers is now live in nine U.S. cities and will be launching in more in the near future. This will mark Google’s second acquisition to help its deals presence; the first was the buyout of DealMap last month, which enabled Google to shows deals on Google Maps.

DailyDeal offers deals in Germany, Austria and Switzerland, so it will give Google a quick way to add customers in those countries. It launched in December 2009 as a two-person startup and has quickly grown, with a reported 252,000 coupons sold in the first quarter of this year. The Austrian version of the site has already reportedly surpassed Groupon in the country.

Google Offers and the newly acquired companies will likely get more attention with the introduction of Google Wallet, a service that is quietly launching today and should become more prominent in the coming months. Wallet is Google’s long-awaited mobile payments service that will let users pay for goods using their Android phones.

Now a startup with the pleasingly direct, almost rude name of Gimme (the founders spell it Gimme!) has a solution: Print a scannable QR code on the coupon and let customers redeem their coupons right on the spot with their mobile phones.

The company announced its product today at Demo Fall 2011, a product showcase in Silicon Valley.

“From a consumer perspective, it’s hard to really feel a sense of loyalty for a business if you’re constantly clipping coupons or printing vouchers,” said Gimme CEO Steve Basmaijan. “Eliminating the need for coupons and vouchers while still providing discounts made a lot of sense.  Plus, who wouldn’t want cash back at places they love to shop and dine?”

The system works for cash rebates, too. Instead of having to mail in a rebate code, you just submit the QR code on the receipt and get cash back on the purchase, right on the spot.

Gimme might sound like just another one of a zillion daily discount services, like Groupon, Living Social and others. But its emphasis on making redemption easy, while encouraging repeat visits, is an interesting twist on the discount model. Basmaijan says that the problem with daily deals sites is that they provide no incentive for return visits.

“Group purchase discounts are great at attracting customers, but horrible at retaining them,” Basmaijan said. “Businesses trying to promote products or services solely through group deals would be the same as building a house only using a hammer, it’s just one tool, and you need more than one tool to build a house.”

The model is similar to DailyGobble, which lets consumers get cash back by snapping photos of restaurant receipts. According to Basmaijan, DailyGobble struck more than 500 partnerships with restaurants in New York and San Francisco just three months after launching, so he’s confident that he can pull off a similar trick with Gimme.

Gimme’s system is set up to let customers redeem discounts using any device with a camera and internet connection. Customers can submit QR codes by scanning them via the Gimme app (soon to be release on iOS and Android), through third-party barcode-scanning apps or by sending in a picture message.

For businesses, the company’s software can integrate with the existing point of sale system. Business customers can also access it through a web portal or a tablet app.  The software communicates with Gimme’s back-end infrastructure to generate a unique code for each transaction.  These codes are printed at the bottom of the receipt upon the completion of the sale.  Gimme’s infrastructure is based on a combination of Java, Scala, Play Framework and MySQL.

The risk is that Gimme’s technology might be too easy for another, larger company to reproduce. If the founders are smart, they’ll be filing patents on some key aspects of their business process or technology right now. Otherwise, it’s just a matter of time before we see GroupOn (or Google) offering QR code rebate redemption.

The company was founded in 2011, has just three employees, and is based in Coppell, Texas, about 25 miles outside of Dallas. It has been bootstrapped so far, with just $10,000 in funding from the founders and their friends and family.

Gimme is one of 80 companies chosen by VentureBeat to launch at the DEMO Fall 2011 event taking place this week in Silicon Valley. After our selection, the companies pay a fee to present. Our coverage of them remains objective. There’s still plenty to see at DEMO, and VentureBeat readers can get a special discount on registration for the remainder of the show at demo.com/VBDay.

Top photo courtesy Gimme.

The Google Offers service, which sends Groupon-like daily deals to your email box, launched in June in Portland and quickly expanded to include New York and San Francisco.

Google attempted to buy Groupon in late 2010, but Groupon declined the reported $6 billion offer to pursue its own lofty goals and even filed for a $750 million IPO (although, that IPO may be in trouble now). In response, Google introduced Offers, which will pose a serious challenge to Groupon, Living Social, and other daily deal sites because Google has so much more cash to burn.

The daily deals space has become increasingly crowded as more players enter the market. The space has already had some victims too — after five months, Facebook decided to kill off it deals program, and Yelp said it will significantly scale back its deals.

You can subscribe to Google Offers at google.com/offers. You can also use the Google Shopper Android app to find and buy Offers.

The first five Offers in the new cities look fairly decent. Here is how Google lists them on the Google Commerce blog:

In Austin, the first Google Offer is from Juan in a Million with $5 for $10 worth of food and drink. The menu at this locally-adored Mexican restaurant includes the legendary “Don Juan”– El Taco Grande of the Breakfast Taco Challenge that defeated Adam Richman on the Travel Channel’s Man vs. Food series. Visit the Google booth at the ACL pre-party Thursday night to learn more.

Toscanini’s Ice Cream in Cambridge down the street from MIT, is running our day-one Google Offer in Boston. Spend $5 for $10 worth of gourmet ice cream, choosing from delectable flavors like Burnt Caramel, Ginger Snap Molasses and Grape Nut.

Falafel is on the menu in our nation’s capital, with today’s Google Offer of $3 for $6 of food and beverage from the fun and funky Amsterdam Falafelshop in D.C. Redeem it for their world-famous falafel and make room for creative toppings like crunchy onions, garlic cream sauce and house-made pickled veggies.

In Denver, get $20 of merchandise for $5 at all three locations of Tattered Cover Book Store, celebrating its 40th anniversary this year. Meet your new favorite author, cozy up with a latte and a magazine or browse through thousands of books and unique gift items in antique filled stores, each with its own indie ambiance.

The Seattle Aquarium has a Google Offer you “otter” buy today with $9.50 for one day’s admission worth up to $19, that can also be applied toward an individual or family annual membership. See sand crabs, harbor seals, sea urchins and jellyfish frolic in the waves at this beloved Seattle institution. Check the calendar for upcoming events like underwater pumpkin carving.

Have you used Offers so far? What do you think of the deals compared to Groupon?

Facebook did it; Yelp did it; now Google is doing it. But when big names start pulling out, we have to ask: is this business harder than it looks?

There are a couple of ways to operate a deals site. First, you can offer deals you have worked out yourself. In simplest of terms, a company operating under this model directly contacts a targeted business, decides on the revenue share and pushes out that deal to its userbase. Groupon operates under this approach.

Second, you can aggregate deals from other deals sites and publish them on your own website. Facebook started its deals program out using this model; later, it switched to Groupon’s formula.

In theory, these deals are a mutualism: free marketing and new customers for a share of the profit. Daily deals have made companies like Groupon successful enough to file for an initial public offering.

But as with most transactions, there’s a hidden cost. Facebook felt it with the recent decision to drop out of the deals scene. Yelp took a step back on its deals program as well. Does Google Offers, the search behemoth’s own daily deals offering, stand a chance?

Greg Sterling, the founding principal of Sterling Market Intelligence, sees the challenges as two-fold: competition and business structure.

“Groupon and LivingSocial blazed the trail,” Sterling told VentureBeat in an interview. “And then all these clones would use as a sales tool lists of businesses that use Groupon deals.”

Then they call these businesses and then ask them to run a deal with them.”

In essence, the deals ecosystem is plagued with vultures. Smaller, competing daily deals sights scrape Groupon’s client list for poaching opportunities because these businesses have already shown interest in using the deals model. It eliminates the grunt work of finding those willing and able to support a deal.

And the competitor landscape isn’t getting any smaller. It feels like a new deals site, broad or niche-focused, appears every day. There are deals sites for moms, dogs, cats, gay people, green people, Jewish people and a slew of geo-specific communities. It’s enough to make you reminisce about those late nights waiting for your midnight Woot.

As for the structure of deals, as Yelp chief executive Jeremy Stoppelman said in a blog post on the subject, “It hasn’t been all rainbows and unicorns.” High revenue shares, such as Groupon’s 50/50, leave small businesses with a chunk of change missing while product flies out the door. So why agree to the deal in the first place?

The high influx of new customers should bring repeat customers, but not every business is experiencing new business with the increased exposure. A 2010 study of 150 merchants, performed by Jesse H. Jones Graduate School of Business at Rice University, showed that 32 percent of these Groupon clients were unsatisfied and unprofitable.

Lacking repeat business may be due to the fact that deal seekers are deal seekers. They may have never considered a water polo class or trendy restaurant if the deal wasn’t available.

So what of the big companies like Facebook, Yelp and Google that have opened (and closed) their own Groupon competiors?

Yelp

Yelp launched its deals program last year and announced in a blog post yesterday that it is cutting its deals staff in half from 30 to 15.

“Over the course of the last year, we have tested several iterations of the daily deal,” said a Yelp spokesperson in an email to VentureBeat. “[We] have recognized that small businesses want to participate in sustainable marketing campaigns that give them exposure to new consumers who will likely become loyal or repeat customers. Yelp Deals is one offering in our portfolio of ad products that we present to small businesses; it is not our core product.”

Perhaps herein lies the problem. Finding businesses, copy writing offers, fielding customer service inquiries, managing revenue share and more all add up. Running a deals site is a business in and of itself.  According to the same blog by Stoppelman, Yelp cut its deals division in half because the employees were focusing on both deals and local ads. This may have been an effort to streamline and cut distractions.

Facebook

Facebook started their deals program in April 2011, only to shut its doors five months later.

The social network told VentureBeat in an e-mail last week, “After testing Deals for four months, we’ve decided to end our Deals product in the coming weeks. We think there is a lot of power in a social approach to driving people into local businesses. We’ve learned a lot from our test and we’ll continue to evaluate how to best serve local businesses.” But deals just wasn’t able to make the cut.

Sterling , like most, didn’t see the sudden departure coming.

“I was surprised, frankly, that Facebook pulled back and Yelp after that,” he said, referencing Yelp’s recent announcement to cut its deals team in half. “Because the minute Groupon showed up on the scene I thought, ‘This is exactly what Facebook could do… and [do it] more successfully.’”

Facebook had the audience and marketing capabilities to take some market share away from Groupon, but it pulled back.

“It was almost as thought they had some initial data from the market and then they [started the program], looked around and decided, ‘This isn’t for us,’” said Sterling.

Google

Google Offers went live in June and is still in a beta testing phase, only available in Portland, the San Francisco Bay Area and New York City. Despite its competitors backing down, the company seems to be pushing on.

“This beta is just the beginning,” a Google spokesperson told VentureBeat.

On Wednesday, Google showcased one of its deals on its front page, spurring talks that the search company may be trying to take on Groupon, the company Google tried to acquire for $6 billion in 2010.

According to Sterling, Google needs to really focus in order to survive up against a mushrooming competitor landscape and challenges of the business itself.

“I think that Google, if it got the resolve, could be one of the leading players in the space. It’s a question of how much commitment they’re going to make,” he said. “There’s a question around their commitment to building a sales force to scale.”

Google may already have a leg up, however. “Google may be taking less of a margin than competitors and subsidizing like they did early on with AdSense.” Sterling did specify this was a rumor.

“This is a very competitive market,” the Google spokesperson added, “For businesses, an important distinction from other local deals providers is that the revenue from pre-paid Google Offers comes to them within a week. We deliver 80 percent of the revenue from running a Google Offer to the business within 4 days and the remaining 20 percent less refunds within 90 days.”

Still viable or dead on arrival ?

According to Larry Handen, investor in European deals site Groupalia and managing director at Insight Venture Partners, there is a certain discipline needed to make a deals site succeed. Speaking of Groupalia’s senior leadership, he told VentureBeat, “They’re thinking in terms of quarters and years, but they are acting in terms of campaigns and hours and days. In this market, that’s exactly what you need.”

What he is saying is simple. You need a broad outlook, with the dedication to handle day-to-day challenges to succeed. With distractions surrounding big companies like Yelp, Facebook and Google, it may be hard to stay focused. Keeping a trained eye, however, could lead to the deals win.

“It’s a bit overwhelming,” Sterling said,  “But it can work very well for certain kinds of businesses.”

[First image via Gunnar Pippel/Shutterstock]

Competitive pressure appears to be wearing on Groupon, who announced declining profitability in mature markets last week. Savvy local businesses now compare multiple services and demand lower commissions. Consumers, overwhelmed with daily deal newsletters, buy less often from a single provider.

So what does the future look like for Groupon, a company on the verge of a $20 billion IPO? With the exception of LivingSocial, none of the daily deal copycats are large enough to pose a real threat. Larger competitors like Google seem no more likely to unseat Groupon than they were Twitter or Facebook.

The real challenge for Groupon, like most market innovators before it, may be the evolution and fragmentation of the industry it created.

Groupon is a vertically integrated business, performing three major functions in-house: deal sourcing, inventory management and consumer sales. Every day Groupon’s telemarketers make half a million calls to small businesses around the world. Negotiated offers are handed to copywriters and account managers who push them to Groupon’s 116 million consumer newsletter. As the pioneer of daily deals, Groupon had to perform all of these functions internally – none of them existed three years ago.

Groupon’s newest crop of competitors is beginning to work together, allowing each to specialize in one of these three major areas:

Merchant Sourcing. Merchant advocates (like Signpost) believe they can more efficiently reach merchants and manage their offers. Because they’re not limited to a single distribution channel, these companies are able to serve a wide variety of merchants and offer flexible terms.

Inventory Management. An emerging group of companies now operate a ‘deal exchange’. Approved merchant advocates push their deals into an exchange where each deal is matched with the right set of publishers.

Consumer Distribution. Thousands of new and existing publishers now look to local deals to better monetize their consumer audience. Exchanges may allow them to select the most relevant deal(s) for their audience and avoid the cost of a local sales force.

The real threat for Groupon is that one or more players in each of these segments (which I’ve simplified) beat the corresponding function at Groupon. The resulting fragmented ‘stack’ has the potential to provide merchants and consumers with a better, lower cost, more relevant product. Traditional online experienced a similar evolution over the last 15 years. None of the market innovators survived as an independent business.

So will Groupon continue to thrive as its market evolves? The company has executed well despite rapid growth, decimated all but one of its direct competitors, and continues to rapidly release new products including Groupon Stores, Groupon Now!, Groupon Getaways and Groupon Home & Garden.

Groupon’s SEC filing indicates the company is no longer innovating fast enough. Groupon’s main growth engine, consumer email marketing, now appears to be ROI negative. Revenue per merchant in established markets like Boston is less than half what it was a year ago. Now, with ten thousand employees and a $4 billion flagship business, Groupon may once again be called on to return to its nimble roots.

Further Reading:

-The Innovators Dilemma (Clayton Christensen)

-The Daily Deal Ad Stack (yipit.com)

 Stuart Wall is co-founder and CEO of Signpost, which aims to connect locals with deals that matter to them. He has previous written guest columns for Business Insider.

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The filing confirmed a boost in email subscribers, from 83 million in the first quarter of 2011 to a total 115.7 million in the second quarter. The company said over 23 million customers purchased group deals in 175 North American markets and 45 countries through the end of the second quarter 2011.

Groupon’s revenue increased from $644.7 million last quarter to $878 million in the second quarter of 2011. The company managed to cut marketing costs from $208 million in the first quarter to $170 million in the second quarter 2011. However, that didn’t positively impact its net losses, which remained flat at $102.7 million for both the first and second quarter of 2011–and almost triple the $36 million loss from the second quarter of 2010.

The company hired more than one thousand new employees in Q2 2011, and revealed a smaller increase in the number of North American merchants compared to past quarters. Both higher labor costs and increased competition from other group deal services likely contributed to Groupon’s net loss.

As previously reported, Groupon removed the shady ACSOI (Adjusted Consolidated Segment Operating Income) measurement from the updated filing. The unusual measurement, which leaves out marketing costs, will still be used internally, the company said in the filing.

The Chicago-based start-up first filed for a $750 million IPO in June.

“If we went out and tried to raise money today as a daily deal site, we would be laughed out of the room,” says Jasper Malcolmson, co-founder and CEO of bloomspot. “No one would invest serious capital in another daily deal site. We were able to do this because we show tremendous business growth, quality consumers and merchants, and we have a fundamentally new business model.”

Malcolmson, who spoke to VentureBeat by phone, doesn’t call bloomspot a daily deal company. This is a departure from the company’s business model in 2010, when it was positioned as a daily deal site for the wealthy. That year it raised $9 million. Malcolmson says bloomspot no longer sends consumers deals on a daily basis.

Instead, bloomspot is attempting to close the redemption loop that has plagued the daily deal industry. Unlike the existing daily deal model that charges merchants regardless of how much consumers spend or return, bloomspot wants to take responsibility for merchant profitability. The company is doing so with algorithms that predict consumer spend and return rates. The data can be used to guarantee spending levels.

Merchants can also track customer visits and in-store credit card transactions and make private offers to big spenders (the image above is an example). Rather than blast deals to a mass of subscribers, bloomspot helps merchants target customers that consistently generate profits. Bloomspot has filed for patents around each of these concepts.

“This data isn’t just one or two transactions, we’ve been doing this at scale for months,” says Malcolmson, who says bloomspot is being used by hundreds of businesses. ”Never before has this data been available.”

This is where Malcolmson draws the line between bloomspot and daily deal companies. He says he doesn’t have any direct competitors, yet.

“We know of no other company in the local offer marketing space that is operating with this business model,” he says. “We’re raising money because we are looking to invest in technology and growing our consumer base. Our focus is innovation.”

Today’s funding was co-led by InterWest Partners and Columbia Capital. Also participating are Menlo Ventures, True Ventures, QED Investors and Harrison Metal.

Bloomspot also closed $5 million of venture debt from Western Technology Investment.

Individual investors include Gary Parsons, former chairman of Sirius XM Radio and Erik Blachford, chairman of Butterfield & Robinson and former CEO of Expedia.

“The local marketing space has always been interesting, dating back to when I was at Expedia,” says Blachford in a phone interview. “We spent a lot of time thinking about these issues. How do we make marketing partners accountable for results? Now you have a situation where you have a holy grail for marketers who use coupons: how to determine ongoing lift. Most marketers don’t have someone tracking that, and then they typically use surveys. Bloomspot’s local marketing strategy could become a widespread phenomenon. There’s much broader potential here.”

Besides bloomspot’s patent-pending marketing concepts and algorithms, the company appeals to investors with it’s online commerce-savvy team. Many are former Yahoo! and eBay executives. Malcolmson spent five years at Yahoo! as VP of Product for Yahoo! Search, as well as VP/GM of the Yahoo! Commerce Division. Co-founder Ashish Baldua spent eleven years in the engineering group at Yahoo! as one of the first one hundred employees of the company, which culminated in leading engineering for the Yahoo! Commerce Division.

Groupon had 50.6 million e-mail subscribers at the end of 2010 and the company reported 83 million subscribers after the first quarter 2011. That number has since increased by 38 percent, according to an unnamed source in contact with Reuters.

The source also indicated that very little of that the subscriber growth is attributed to the acquisition of other services.

Groupon lets users purchase steeply discounted deals from local merchants. Discounts range anywhere from 30 to 80 percent off the regular sale price on food, trips, drinks at a local bar, etc. Groupon takes half of the money from every deal sold, which is a pretty easy way to bring in a lot of money without having to get creative.

The Chicago-headquartered company is still running at a loss despite the astonishing revenue growth, which went from $94,000 in 2008 to $713 million in 2010. More recently, it lost $146.5 million in the first quarter of 2011.

Those kinds of financial numbers, along with the company’s screwy ACSOI metric used to show income, has caused Groupon to amend its initial public offering, as we reported earlier today. Groupon first filed for a $750 million IPO in June.

Groupon was unavailable for comment about the total number of subscribers.

To many, coupons are clutter. They take the form of newspaper clippings, spam e-mails and miscellaneous membership benefits that you always forget to take advantage of. But are they really utilized when they are pushed in our faces? The founders of ChoozOn don’t think so, and developed a new form of coupon discovery.

“What you have is something like a Twitter stream,” said Nick Weir, the co-founder and chief executive of ChoozOn and former Yahoo vice president of data strategy, in an interview with VentureBeat.

It’s ironic that ChoozOn uses Twitter, itself a source of info-clutter, as an analogy for cutting through the clutter. But ChoozOn’s dashboard does help, letting you search for specific products, automatically separating coupons into lists, and offering personalization options.

“A ‘Choozer’ will go through a quick set up process,” said Weir. “They identify categories, brands they like. From there they help by identifying good deals.”

In essence, the web app learns your preferences and aggregates coupons accordingly. It also allows you to claim your memberships, say at Nordstrom, and ChoozOn integrates those special benefits onto your dashboard. But it’s not the nuts and bolts that make this product interesting.

Weir explained ChoozOn has a social angle called “deal clubs”, groups that where people post deals with their own commentary. “Anyone can start a deal club,” he said. “They can be a deal curator, people can follow them. We’re allowing the community to set themselves up as deal mavens.”

Other than developing existing services, ChoozOn will spend the funding on sales and marketing team expansions. It will also go toward a new product: a dedicated ChoozOn e-mail account for its subscribers. From this inbox, users can filter all those marketing e-mails from Apple, Amazon.com and Frederick’s of Hollywood to their existing coupon hub. ChoozOn will extract any deals in those e-mails and make them searchable in your coupon stream.

“In focus groups, we’ve gotten five stars across the board for this product. We’ve never seen that before,” said chief marketing officerHunter Madsen.

In addition to investing in this round, Michael Orsak of Worldview Technology Partners and James Brown of AVG Ventures joined ChoozOn’s board of directors.

Speaking of Orsak, Weir explained, “He’s a very good sounding board for all aspects of the business. He’ll help in terms of further fund raises.”

But ChoozOn won’t be lonely in when it comes to the coupon industry. Robust coupon sites such as Ebates.com and RetailMeNot.com serve thousands of unique visitors. In fact, coupon site portfolio company WhaleShark Media announced a $10 million investment led by Google Ventures.

Weir responded, “RetailMeNot is a competitor of sorts, but we have a laser-like focus on this idea of personalization. Look, it’s all out there, it’s hard to keep track and manage. We want to do that for you.”

ChoozOn, currently in beta testing, was founded in 2010 and has been bootstrapped until this investment. The company has three offices, in Philadelphia, Pa., Bellevue, Wash., and a development center in Jordan. Currently, ChoozOn employees 40 people, but is looking to grow to 50 by the end of the year.

“Deals” has become part of our daily vocabulary. Entire companies, like Groupon, are created around an interest in saving a buck. WhaleShark Media is no exception and is growing readily to meet the demands of avid savers.

WhaleShark owns a suite of coupon and savings-related websites such as Deals.com, CheapStingyBargains.com, and RetailMeNot.com. The latter is claimed to be the biggest online coupon site in the world adding 1000 new merchants a day, according to its parent company.  WhaleShark Media makes money on these websites in part from commissions on sales along with advertising revenue.

Despite being profitable on its own with an expected 140 million unique visitors for this year, WhaleShark Media accepted funding from Google Ventures and plans to use it for a specific purpose.

“We are a portfolio of sites that we have acquired,” said Cotter Cunningham, founder and chief executive (pictured below), “We’re interested in making a series of other acquisitions.”

Cunningham would not provide many details on what kind of acquisitions, but did state that WhaleShark would “absolutely” make an acquisition in the next year. He also stated that the company would like to expand globally and will be considering international acquisitions.

As for the partnership with Google Ventures, it seems a bit of courtship was necessary.

“We met them when we were raising the $90 million [second round from Austin Ventures, Norwest Venture Partners and Adam Street Partners] in November,” said Cunningham, “They chose not to be in that round, but we stayed in touch and it kind of clicked.”

WhaleShark liked Google Ventures not only for its team and name, but also because of “value add” services such as user interface and recruiting consulting, which the company is already utilizing.

Cunningham worked most closely with David Krane and Karim Faris of Google Ventures, whom he described as “great guys”.

In a statement, Faris explained Google Ventures’ interest in the company. “WhaleShark exemplifies the key characteristics we look for in an investment — community-fueled growth and products that address a pervasive market need.”

Cunningham also brought rental home database HomeAway’s chief executive, Brian Sharples onto WhaleShark’s board. HomeAway and WhaleShark have both received funding from Austin Ventures and are both located in Austin, Texas.

“He’s kind of done what we’re trying to do,” said Cunningham. “We’re asking him for advice around some of our acquisitions and expanding internationally.” HomeAway, which Sharples took public, has presence in many markets globally.

“He has also been fantastic thinking through hiring people and retaining them,” he said.

Currently, WhaleShark has 75 employees and is hiring. The company was founded in 2009 and has since had $133 million in funding to date. Investors include Adam Street Partners, Norwest Venture Partners, Austin Ventures and Google Ventures.

Yipit’s report tracked 17,958 discounts offered in May across 30 North American cities including Miami, Atlanta, New York, Dallas, Denver and Toronto. Groupon had 48 percent of the group-buying market in May –  down four percentage points from the previous month.

Groupon’s biggest competitor, LivingSocial, saw its market share rise four percentage points from the previous month to 24 percent in May. Trailing the two largest group-deal sites in May were TravelZoo, BuyWithMe and Gilt City, according to the report.

Both Groupon and LivingSocial are making less money per deal than in previous months as group deals proliferate on the web, David Sinsky, Yipit Data Product Manager, told Bloomberg. But while both sites may be making less money per deal, the number of deals sold has increased, which has boosted revenue.

Chicago-based Groupon filed a $750 million initial public offering earlier this month despite heavy criticism about the company’s long-term sustainability. The company has consistently lost money every quarter since launching in 2009 except for the first quarter of 2010, when it brought in an $8 million profit.

One reason for Groupon’s inability to generate a profit could be due to the company’s rapid rate of growth. At roughly half the size of Groupon, LivingSocial doesn’t have that problem.

If LivingSocial can turn a profit despite its smaller size, it may become the more successful group deals company by default.

via Bloomberg

July 9-10, 2013
San Francisco, CA

Early Bird Tickets on Sale

Music and broadcast media discovery app developer Shazam announced that it has raised $32 million in its most recent round of funding.

Shazam builds an application that gives iPhone and other mobile device owners a way to discover new content by listening to music or television broadcasts. The application “listens” to the sounds of the music or a television broadcast after a user “Shazams” it, or activates the app. It then checks that sound file against a database on a remote server to see if there is additional content to send over to the user.

The extra content can range from coupons for cheaper clothes and products if the user “Shazams” a television advertisement, or the lyrics to a song if the app is used while listening to a song. There are usually visual cues on a television broadcast that tell a user to “Shazam Now,” because mobile device owners probably wouldn’t know to use the application if they weren’t told to do so, said Shazam chief executive officer Andrew Fisher.

While the music version of Shazam has been around for a while, the broadcast version is relatively new. Shazam launched the broadcast part of its business around a year ago and partners with a number of companies to generate revenue from those deals. Right now, the company works with companies like Old Navy, American Express and Proctor & Gamble and secures revenue through deals. Eventually the company will create a revenue-sharing system that will allow it to take a slice of the revenue from a single television advertisement impression detected when Shazam is used.

The application is pretty accurate at picking up sounds. In a home environment, the app will pick up the sound and fetch additional content 100 percent of the time. But in crowded environments like a bar or a sports game, the app’s ability begins to degrade because of the excess noise. The application is still pretty accurate because it is being built for “real-world environments,” Fisher said.

The latest funding round was led by Kleiner Perkins Caufield & Byers and Institutional Venture Partners. The funds will be used to improve the company’s infrastructure, which will have to be retooled to account for increased growth. Shazam expects to invest money in infrastructure that will work well beyond 250 million users, which might require a completely different architecture than what the company uses right now, Fisher said. By expanding into television broadcast content discovery, Fisher said he hopes Shazam can reach a valuation of around $1 billion in two years.

Shazam has more than 150 million users and adds around 1 million new users every week, Fisher said. That’s largely because Shazam is installed in handsets like those produced by Nokia and works on multiple operating systems, he said. Around 45 million Shazam users are located in the United States. The application should have more than 250 million users in around 2 years, Fisher said.

The U.K.-based company launched in 2001 and has around 100 employees spread across offices in the United Kingdom, Palo Alto, Calif., New York, and Los Angeles. The application, which is free, is available on the iPhone App Store and works on the iPhone, Android devices, BlackBerry devices, Windows Phone 7 devices and phones running Nokia’s Symbian mobile operating system.

The company has raised more than $62 million to date across several rounds of funding and a seed funding round. The company did not disclose how much money it raised in one of its funding rounds.

The company plans to use roughly half of the investment to help push the newspaper-dominated coupon market into digital deals as well as expand the coupon industry. It intends to hire 100 new employees before the end of 2011, which will grow its total workforce by more than a third.

Also, $100 million of the funds will go to early investors and employees in a move that’s similar to what online group-deal startup Groupon has done.

The decline of print publications has allowed the 13-year-old company to continue its strategy of pushing vendors to put coupons online instead of distributing them through newspapers.

The new investment is rumored to boost Coupons.com’s valuation to $1 billion, which would make it the third startup this month speculated to reach that valuation amount — behind social bed and breakfast startup Airbnb and mobile payments startup Square.

The site, which has over 4 million members, offers limited-time offers on apparel, accessories, shoes, and jewellery, intended to target men, women and children. Starting at 11am each day, sales last for 36 hours or until sold out, and have featured prominent brands such as Calvin Klein, D&G, French Connection.

Founder and CEO Paul Hurley told AllThingsD the funds will be used to “support growth and expansion plans, including new categories, partnerships, technology initiatives, marketing campaigns and hiring.”

With players such as Groupon and LivingSocial carrying multibillion dollar valuations, the deal shopping space has seen a lot of financial interest. Ideeli’s main and closest competitor, Gilt Groupe, has also raised up to $100 million and is supposedly in talks to raise another $80 – $100 million from private investors.

Ideeli was founded in 2007 and raised a $3.8 million round in December that year, following up with a $20 million round in 2008. The latest round brings its total funding to $64.8 million. Investors in this round include Next World Capital with Cue Ball Capital, StarVest Partners, Constellation Growth Capital and Kodiak Venture Partners.

CouponFactory is a platform that gives brands and small businesses a simple way to create and distribute digital coupons. The service, which has no set-up fees, lets businesses name, describe, and design their offers. After the coupons have been created, companies can distribute them via the web, mobile, or Facebook and Twitter accounts. CouponFactory also provides analytics to businesses, which include the number of impressions, clicks, and conversions, to better help companies optimize their offers.

CouponFactory is entering the large and profitable online coupon market, but it will need to take on a wealth of competitors including Groupon Stores, which enables businesses to create group deals at any time; Facebook, which released Facebook Deals in Europe and Canada earlier this year; and startups such as the newly launched HuddleBuy.

Despite this competition, some brands are not keen on using group-buying websites, so CouponFactory may provide an easy to use alternative.

CouponFactory will also receive help against its larger competitors from its Rogers, AZ-based incubator Rockfish Labs. Some of Rockfish’s clients include brands such as Walmart, Sam’s Club, Cisco, and Tyson Foods.