(Reuters) - Groupon Inc forecast a surprise quarterly loss as it spends more to advertise its online marketplace, which is expected to make up for its lagging daily deals business, and its shares fell more than 13 percent in extended trading.
The stock had briefly risen more than 18 percent in extended trading after the company reported better-than-expected fourth-quarter results, helped by strong demand in the holiday season for its business that sells discounted products.
Groupon, which competes with Amazon.com, eBay and Google, has been building an online marketplace, called Pull, that lets people search for and buy deals in their area.
This is a big change from Groupon's original business, which sends a daily email to subscribers offering one or two deals which have to be bought the same day but can be redeemed later.
"The majority of our customers in North America still have no idea they can come to Groupon and search among our 80,000 deals in real time," Chief Executive Eric Lefkofsky said on a conference call with analysts.
However the shift to the Pull marketplace means that customers can delay their purchases rather than make them on the same day as was the norm in its daily deals business. These delays in purchases are putting pressure on the growth in the overall local deals business, Lefkofsky said.
"We believe that this trend is likely to be with us for a few more quarters until the positive effects from Pull outweigh the short-term pressure this transition creates with our local business."
Revenue from its local deals business accounted for about 37 percent of revenue in the fourth quarter ended December 31. Only Groupon Goods, the company's discounted product sales business, was bigger.
Groupon will spend $25 million exclusively on marketing Pull in the first quarter, Chief Financial Officer Jason Child told Reuters. In comparison, marketing costs fell 7 percent to $56.5 million in the fourth quarter.
The company will also spend $20 million to integrate its recent acquisitions - Ticket Monster and Ideeli, Child said.
Groupon bought rival LivingSocial Inc's South Korean unit, Ticket Monster, for $260 million in November and Ideeli Inc for about $43 million last month.
Groupon forecast an adjusted loss of 2-4 cents per share, on revenue of $710-$760 million for the quarter ending March.
Analysts on average were expecting a profit of 6 cents per share on revenue of $668.7 million, according to Thomson Reuters I/B/E/S.
The company's net loss slightly widened to $81.2 million, in the fourth quarter, from $81.1 million, a year earlier.
On a per share basis, the loss was 12 cents per share, flat with a year earlier. Excluding items, it earned 4 cents per share in the latest quarter.
Revenue rose 20.4 percent to $768.4 million. Gross billings — a key metric that reflects the gross amount collected from customers - increased 5 percent to $1.6 billion.
Analysts on average were expecting earnings of 2 cents per share on revenue of $718 million.
Groupon's shares were trading down 10.3 percent at $9.21 in trading after the bell. They closed at $10.279 on the Nasdaq on Thursday.
Editing by Savio D'Souza