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Groupon continues its e-commerce transition

Record downloads of its app and North American revenue growth have Groupon feeling good about mobile initiatives and its ongoing evolution from a provider of daily deals via email to a full bore e-commerce marketplace.

The company said it experienced a record 9 million downloads of its app during the third quarter ended September 30, bringing the total number of downloads to 60 million. The company also said it achieved a major milestone during September when, for the first time ever, more than half of Groupon transactions were completed on a mobile device in North America. The popularity of mobile help the company achieve 24% revenue growth in North America. Groupon says it now has 43.5 million active customers, 10% more than the prior year, although it defines “active” rather broadly as anyone who has purchased a Groupon during the past 12 months.

"Our Local business showed continued strength in the quarter, particularly in North America,” said Eric Lefkofsky, CEO of Groupon. “Mobile adoption continued to increase in Q3, reflected in our record nine million app downloads. We’re pleased with our progress, but we still have work to do as we transform the business from our daily deal email roots to a full e-commerce marketplace.”

Along those lines, Groupon said it acquired leading Korean e-commerce company Ticket Monster from Living Social in a deal valued at $260 million.

“Ticket Monster has been successful building a mobile commerce business in one of the largest markets in the world. It will serve as the cornerstone of our Asian business, bringing scale and e-commerce expertise to that region,” Lefkofsky said.

The three year old company generates annual billings of more than $800 million and offers Groupon other benefits related to its shift to become more of an e-commerce company. Ticket Monster provides customers with a broad range of product, local and travel offers.

“The (Ticket Monster) team shares our vision, is already leveraging a truly mobile marketplace as well as one that has little reliance on email,” said Lefkofsky.

Groupon is looking to accomplish a similar objective closer to home, diminishing its reliance on email and selling products directly to shoppers. The company said its Marketplace concept continued to gain traction in the third quarter and accounted for 6% of total North American traffic. More importantly, customers who search for products spend 25% more than those who do not, according to the company.

Despite strength in North American, weakness in international markets proved to be a drag on measures of top line growth. For example, the company’s gross billings, which reflect the total dollar value of customer purchases of goods and services, increased 10% globally to $1.34 billion from $1.22 billion while total revenues increased 5% to $595 million compared to $587 million.

Excluding a one time charge of $18.5 million related to unredeemed Groupons internationally, the company’s adjusted earnings before interest, taxes, depreciation and amortization were $62.3 million, down from $65.8 million. The net loss for the quarter was $2.6 million compared to nearly $3 million the prior year. Operating income fell to $13.8 million compared to $25.4 million.

At the end of the quarter, Groupon had $1.1 billion in cash and cash equivalents.