Groupon shares fall after quarterly results

SAN FRANCISCO — Groupon shares slumped more than 10% late Thursday after the online deals company forecast meager profit growth in 2014 because of increased marketing spending.

The company forecast a first-quarter loss of between 2 and 4 cents a share, excluding stock compensation, acquisition costs and other items.

For 2014 as a whole, Groupon said adjusted earnings, before interest, tax, depreciation and amortization, or EBITDA, will be "slightly above" 2013 levels.

"The fourth quarter was solid, but the guidance was weak, especially on the profit margin side," said Sameet Sinha, an analyst at B. Riley & Co. Wall Street was looking for EBITDA to grow more than 30% this year, he noted.

Groupon used to email one daily deal to millions of subscribers. However, after that strategy floundered and the stock slumped, the company built a searchable online marketplace for its deals. On Thursday, Groupon said it will spend about $25 million more on marketing and other growth initiatives to encourage more people to try out this new site.

"We provided pretty strong revenue guidance," Eric Lefkofsky, CEO of Groupon, said in an interview with USA TODAY. "To drive some of that revenue growth we had to make additional investments in marketing."

Groupon said fourth-quarter revenue came in at $768.4 million, up 20% from a year earlier and ahead of Wall Street estimates. It also forecast strong first-quarter revenue growth. However, shares of the company dropped 11% at $9.15 in after-hours trading on Thursday.

"People may want revenue growth and the profit growth too," Lefkofsky said. "But like Amazon, you don't see that type of torrid growth without spending on marketing to attract customers to the top of the e-commerce funnel."

Groupon will spend the extra marketing dollars on search-related initiatives in areas such as search engine marketing and search engine optimization. This involves buying ads on common keywords used in searches on Google and Microsoft's Bing ! service and tweaking websites to try to make them show up higher in organic search results.

Lefkofsky also said Groupon would buy more display ads online.

"We expect over time not to have to invest as heavily," he said. Once people try out Groupon's new online deals marketplace a few times, the hope is that they will come back by themselves, the CEO explained.