Behind the Scenes at Groupon’s Tech Headquarters as It Prepares to Report First Public Earnings

In a three-story building in Palo Alto, Calif. — formerly occupied by Danger, the developer behind the T-Mobile Sidekick — Groupon has been trying to build out a Silicon Valley technology center, one acquisition at a time.

The pursuit was kicked off two years ago with the purchase of mobile app development shop Mob.ly. Mihir Shah, the company’s CEO, started recruiting for the social buying company, and then became the Groupon’s VP of mobile.

Since then, there has been a hodgepodge of acquisitions, including Campfire, which builds chat, calendar and media-sharing tools, as well as Zappedy, which makes a platform for merchants to redeem Internet-based offers more easily.

Last week, it continued with Adku, a low-profile San Francisco start-up that helps e-commerce retailers fine-tune their recommendation engines using external factors, such as whether it is hot or cold outside.

None of the teams have been extremely big or expensive, but Groupon insists that they already are having a major impact on the company.

That may be hard to believe in a company of more than 10,000 employees, most of which are salespeople who are not working on technology.

But Adku’s co-founder Carlos Whitt, who is joining the company along with five others from his team, said the entrepreneurial vibe in the building is “ridiculously exciting.”

“The opportunity, the innovation and entrepreneurs are all there,” he said. “It’s a good intersection.”

Still, Groupon has not been able to attract every entrepreneur it pursues. It had been actively trying to buy other social start-ups, such as Gowalla. That particular deal went to Facebook. Another would-be Groupon acquisition target, Clever Sense, was won by Google.

No matter, according to Mob.ly’s Shah, who said Groupon is actively evolving beyond a daily deals service into a company that builds a set of key marketing tools for local merchants that increases sales, cuts costs and boosts productivity.

Some of the early tools include online calendars to make it easy for spas or gyms to book appointments online, and rewards programs that allow merchants to identify loyal customers who return and spend a lot of money.

Groupon also recently revamped its merchant center, where its customers can manage their daily deals and other programs in an online dashboard.

Shah said the idea is to create a marketing suite that makes small businesses more efficient and productive.

“We never want to stand still and be a big company,” he said.

But the big question is whether those tools will be sticky enough to keep merchants coming back to offer new deals, which is where Groupon gets all of its revenue from. That’s because most of the new tools are expected to be given away for free and not generate any additional income — at least for now.

It will also have to be enough to keep away other close competitors, such as LivingSocial, Google and Amazon.

The ability to spur innovation and keep ahead of rivals will be on the minds of analysts when Groupon reports its first financial results as a publicly held company this afternoon.

Wall Street is expecting the company to report three cents per share profit on revenue of $475 million in its fourth quarter earnings, according to Thomson Reuters.

That’s up from $430 million in revenues in the third quarter and will be Groupon’s first profitable quarter in nearly two years

In particular, analysts will be listening for updates on some of the company’s core programs, such as Groupon Now, which is its mobile product that allows consumers to purchase deals minutes or hours before redeeming them based on their location. Other metrics may be shared regarding loyalty and retention programs.

This is also Groupon CEO Andrew Mason’s first big chance to speak to the investment community since the end of the company’s quiet period (which he wasn’t really good at keeping, anyway).

Groupon’s stock increased nearly three percent yesterday to close at $24.19, which is just above its IPO price of $20 a share.


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I think the NSA has a job to do and we need the NSA. But as (physicist) Robert Oppenheimer said, “When you see something that is technically sweet, you go ahead and do it and argue about what to do about it only after you’ve had your technical success. That is the way it was with the atomic bomb.”

— Phil Zimmerman, PGP inventor and Silent Circle co-founder, in an interview with Om Malik