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25% of Groupon share value WIPED OUT after rates slashed

Voucher bazaar forced to cut fees to lure wary merchants

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Groupon lost a quarter of its market value yesterday after it admitted it was taking a smaller cut of revenue on its coupons to keep retailers interested.

The daily deals bazaar's stock dropped 24.78 per cent yesterday to $5.98 after its fourth quarter results were once again a disappointment to investors.

Critics have been concerned that Groupon is having trouble attracting interest from new merchants and retaining existing retail clients to offer its users voucher deals, and these problems appear to have escalated over the past year.

Chief financial officer Jason Child told Reuters that Groupon's results over the holiday period were affected by its decision to give retailers more of the money from their deals to persuade them to sign up to the site or run new offers.

The company ended up with a net loss of $80m for the quarter compared with $60m in the same quarter last year, despite the fact that revenues were up 30 per cent to $638.3m.

Groupon's international business in particular is suffering as it fails to hold vendors' interest in the whole voucher business model.

Merchants have previously complained that Groupon takes too much of a cut from the online deals. The site forecast long-term "take rates" of 30 to 40 per cent during a conference call with analysts.

The daily deals warehouse said part of the reason it had cut its take rate was to get folks onto its latest wheeze, Local Marketplace, which relies on people searching for something to do or buy nearby.

Despite the fact that the Local Marketplace idea is still in its infancy and Groupon Goods, the firm's discounted tat-peddling division, is doing well, the site isn't holding any high hopes for the first quarter this year. It's expecting revenue of between $560m and $610m with the possibility of an operating loss of $10m or a profit of the same, compared to an operating profit in the first quarter of 2012 of $39.6m. ®

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