Online coupon company RetailMeNot Inc forecast current-quarter revenue below analysts'average estimate, as visits to its websites dropped after Google Inc changed its Web search ranking rules to weed out spam.
Shares in RetailMeNot fell 22 per cent to US$19.73 (S$24.58) in extended trading on Monday.
Google's changes in May have reduced RetailMeNot's visibility by as much as 33 per cent, digital marketing software maker Searchmetrics said. (http://bit.ly/1jFwj3k) The company estimated third-quarter revenue of US$53 million to US$57 million, short of analysts' forecast for US$62.6 million according to Thomson Reuters I/B/E/S. "The reduction in traffic was far from the amount that many people speculated but it has created a headwind against our existing plan for the second half of the year," Chief Executive Cotter Cunningham said on a conference call.
The company earns a commission when a customer makes an online purchase from a retailer immediately after visiting RetailMeNot's website.
A lower ranking of its website on a search engine would make it difficult for users to find the company's deals. "While we have seen a partial recovery over the past two months, overall organic search rankings were not back to the growth levels we were seeing in the first quarter." Organic search represented 64 per cent of our total traffic on the website, the company said.
Organic search results are ones that appear on a search engine because of their relevance to the keywords used to search and not in exchange of payment for a higher ranking.
For the second-quarter RetailMeNot reported a lower-than-expected quarterly profit, also due to higher investments in product development.
Product development costs increased nearly 90 per cent to US$12.98 million.
Net income attributable to common stockholders was US$4.3 million, or 8 cents per share, in the second quarter ended June 30, compared with a loss of US$999,000, or 68 cents per share, a year earlier.
Revenue rose to US$59.5 million from US$43.4 million.
Analysts on average had expected a profit of 17 cents on revenue of US$60.2 million, according to Thomson Reuters I/B/E/S.