As Groupon celebrates its fifth birthday, we find ourselves once again as pioneers.
In November of 2008 we launched Groupon and created the daily deal industry, giving birth to an entirely new form of commerce. Then, in 2010 we expanded internationally; a journey that would take us to 48 countries across the globe in less than two years. And now, we are redefining the intersection between local and mobile commerce.
Mobile commerce is everything you want to buy when you walk out your front door. It’s defined by where the customer is when they have a need, which makes it inherently local. Mobile commerce is all about interacting with your surroundings and using geographic data to make purchasing more relevant, more personalized, more immediate.
We believe that to win in mobile commerce you need to first win local. We’ve already built the world’s largest local marketplace and “stocked our shelves” with deals that our customers want to buy when they’re out and about: restaurants, spas, live events, hotels, products, and so on. We now need to enhance customer awareness and get people to check Groupon first; making us an integral part of their daily lives.
Over the past five years, we’ve built the business with a singular focus on delivering value for our customers and merchants. For consumers, that means great value on the things that make their lives simpler, richer and more exciting. For merchants, that means more great customers coming in their door. This drives everything we do, and it has allowed us to build a platform that today reaches over 200 million subscribers worldwide.
We’ve also helped more than 650,000 merchants grow their businesses. Last year in the United States alone, Groupon sold 1.2 million pizzas, sent over 3.8 million people to the movies and made sure that more than 5 million fingers were beautifully manicured.
Our incredibly deep knowledge of local coupled with a vast mobile presence have us uniquely positioned to be the place people start when they want to do or buy just about anything, anytime, anywhere.
THE YEAR BEHIND
2013 was a record year for Groupon. Gross billings increased from $5.4 billion to $5.8 billion. Revenues increased from $2.3 billion to $2.6 billion. Adjusted EBITDA increased from $260 million to $287 million. We generated $76 million of operating income, eleven cents of non-GAAP EPS, and $155 million of free cash flow.
We sold 56 million Groupons in the fourth quarter alone. We ended the year with record demand as a result of delivering against our key initiatives: building an always-on marketplace of great deals and expanding the global reach of our mobile business.
We accomplished this while sticking to the principles we’ve discussed with investors in the past. We believe that we are in a large and emerging market and it’s critical for us to claim as much share as possible as quickly as possible. As a result, we made opportunistic investments in marketing and technology to enhance our leading position, and we made several acquisitions, adding companies whose people, markets and technology will serve us well in the future.
WE GREW OUR MARKETPLACE
Launched at the end of 2012, our marketplace took hold in 2013 — growing from 37,000 deals in North America to over 140,000 deals globally during the course of the year. We launched a redesigned website in North America in the fourth quarter, and by December already 8 percent of total traffic was searching, with those users spending over 50 percent more than non-searchers.
We put deals into our marketplace that our customers want, and they respond. While the majority consist of local services, our Goods category has become a nearly $2 billion business in just two years, and our Getaways category has approached a $1 billion business in the same time. Both enjoyed a strong 2013, and we added several new categories, Groupon Reserve and Groupon Freebies, to give our customers more reasons to shop with us. All told, active customers increased 9 percent to 45 million in 2013 and unit sales increased 10 percent to 193 million, despite reducing our marketing spend by 36%. Our brand and consumer value proposition have never been stronger.
WE EXPANDED MOBILE
Increasingly, mobile has become the preferred way customers access our marketplace. Nearly 50 percent of our global transactions occurred on mobile devices in December. Further, by year end, nearly 70 million people had downloaded our mobile app; over 33 million people downloaded it last year alone, over 80% of which were purely organic. Few companies can match our mobile reach, and none have been as successful in making mobile an indispensable part of the shopping experience.
THE YEAR AHEAD
We have three primary objectives for 2014. First is to re-accelerate our local growth in North America and abroad. Second is to improve the gross margins and operating efficiency of our Goods business. And third is to reduce our losses in Rest of World and work toward having every region in which we operate generating positive EBITDA by year end.
To achieve this we will remain focused on the big initiatives that we began in 2013: local, mobile, marketplace, and one playbook.
One of the clearest trends we see is the convergence of local and mobile. Local is wherever you are, and the advantage of mobile commerce is that it can use proximity to enhance the buying experience. In 2014, you’ll see us begin to infuse local into everything we offer.
As the type and variety of deals on Groupon expands, we will continue to make accessing them easier and more rewarding, and we will make redeeming our deals even simpler and faster for our merchants and customers. Our mobile footprint will continue to grow, we will enrich our search and browse features, and our site will become increasingly accessible to our customers, based on their location, interests, and needs.
This fundamental shift in the way customers engage with us will create an incentive to make Groupon an integral part of your daily life. This is the foundation of our long-term “Pull” strategy, and we’re encouraged with our progress to date.
In addition to our focus on building a local marketplace, we have significant growth opportunities in our core email business. We send over 250 million emails every day to our subscribers. We will continue to innovate on our “Push” business throughout 2014 by introducing technology that will make what customers see in their emails more relevant and personalized.
This Push and Pull approach to the market gives us incredible flexibility to serve our customers no matter how they choose to interact with us.
Finally, our “One Playbook” rollout will continue with the integration of our different technology systems onto one primary platform, which will allow us to syndicate our North American innovations to every major market in which we operate globally. Once complete, there will be no need for One Playbook as an initiative, as we will truly be – one company.
As the CEO of a large technology company, you would be lucky to have one business model that over time and at scale could increase the size of your company tenfold. I believe we have two.
First, we are building a local commerce platform that will connect millions of customers and merchants in real time. Second, we are in the midst of a mobile commerce revolution that not only affects local merchants, but every supplier across all of our categories.
As I said at the beginning, in the eyes of our customers, mobile and local are fused together. People use Groupon to book their hotels, order their meals, buy concert tickets, discover amazing things to do with their families, and more. All of these offerings are delivered to them seamlessly through their smartphones, allowing them to access the world around them – the very definition of local – on the fly. The opportunity this creates is simply unprecedented.
With continued innovation and laser focus on execution, we hope to fully realize our potential and become the starting point for local commerce, built on top of the world’s largest real-time marketplace of deals.
We appreciate the continued support of our stockholders and hard work and dedication of our employees as we navigate the company through this stage of our journey.