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Coupon-spaffer Groupon starts to sniff actual profits

And those marketing costs are way down

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Groupon significantly reduced the amount of money it lost in the first quarter of this year, only ending up with a net loss of $11.7m compared to a loss of $146.5m in the same quarter of 2011.

The daily deals site actually managed to make its first ever operating profit, claiming $39.6m on its coupons, but interest and taxes sent the net earnings into the red.

Revenue shot up to $559m, a leap of 89 per cent from the first quarter of last year.

“We are pleased to report a record quarter that demonstrates our progress in unlocking the opportunity in local commerce for merchants and customers worldwide,” Andrew Mason, CEO of Groupon, said in a canned statement on the results.

The coupon site has been trying to prove that it is worth investing in after a number of accounting discrepancies and a failure to turn any of its business into profit, sent shares plummeting by 62 per cent since its first day close of $26.11 to last Friday's close.

After announcing its quarterly results yesterday, stocks shot up by 18.5 per cent to $11.73 a share, with investors still buying in after-hours trading.

Most tellingly, the number one concern about Groupon as a business seems to have been addressed. Critics of the voucher business model have pointed to the large sums needed for marketing wiping out profits, but Groupon's marketing expenses have now actually fallen as its revenue rose.

The site reported marketing expenses of $116m compared to $230m in the same quarter last year. As a percentage of revenue, marketing costs have tumbled from 78 per cent to 21 per cent.

Groupon said it was expecting revenue for the next quarter to be somewhere between $550m and $590m and it is hoping for an operating profit of between $25m and $45m. ®

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