Groupon’s Outrageous Marketing Costs Appear to Be Working

Groupon has spent a ton of money attracting new customers to sign up for its daily deals service.

So much money, in fact, that it wanted to exclude those costs from its financial results — by some calculations — in order to downplay the impact to its bottom line.

However, due to regulatory pressure, Groupon is expected to amend its S-1 document to remove those figures from its next filing, coming as soon as this week, according to an exclusive report by AllThingsD’s Kara Swisher.

Setting the controversy aside for a moment, however, it appears that, while expensive, those marketing efforts have done a good job of getting millions of users signed up for Groupon’s daily deal as quickly as possible.

Groupon has already doubled its subscribers to 115 million this year, up from 50.58 million at the end of last year, Reuters reports. That’s also up 38 percent from just five months ago, when it reported having 83.1 million subscribers at the end of the first quarter.

Groupon is now triple the size of LivingSocial,  its closest competitor at 40 million subscribers.

Groupon likely paid considerably for those users, if its marketing budget in the first and second quarters was anything like last year’s.

In 2010, Groupon reported that it lost $413.4 million using standard accounting practices. When it excludes some costs from its calculations — including online marketing expenses to attract new customers — it recorded a profit of $60.6 million in 2010.

Photo Credit: Groupon.


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