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→Business model: restore, clarifying _why_ groupon's ad text adds to its popularity. Sourced info, not 'puffery'.
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==Business model==
==Business model==
The company offers one "Groupon" ("group coupon") per day in each of the markets it serves. The Groupon works as an [[assurance contract]] using ThePoint's platform: if a certain number of people sign up for the offer, then the deal becomes available to all;<ref name="tipping_point">{{cite news|url=http://www.reuters.com/article/newsOne/idUSTRE5592K720090610|title=Virtual "tipping point" leverages group deals|last=Cohen|first=Deborah|date=June 10, 2009|publisher=Reuters|accessdate=November 30, 2009}}</ref> if the predetermined minimum is not met, no one gets the deal that day.<ref name=twsDecR11/> This reduces risk for retailers, who can treat the coupons as [[quantity discount]]s<ref name=twsDecR11/> as well as [[sales promotion]] tools. Groupon makes money by keeping approximately half the money the customer pays for the coupon.<ref name=twsDecR11/><ref name="leverages">{{cite web|url=http://www.washingtontimes.com/news/2009/jul/08/site-leverages-power-of-group-purchases/|title=Site leverages power of group purchases|last=Boston|first=Gabriella|date=July 8, 2009|accessdate=November 30, 2009}}</ref> So, for example, an $80 massage could be purchased by the consumer for $40 and then Groupon and the retailer would split the $40. That is, the retailer gives a massage valued at $80 and gets approximately $20 from Groupon for it. And the consumer gets the massage, in this example, from the retailer for which they have paid $40 to Groupon. There are certain businesses to which Groupon will not offer its services, including shooting ranges, abortion clinics, plastic surgeons and strip clubs.<ref name="dealmaker">{{cite web|url=http://smallbusiness.aol.com/2010/08/09/groupons-andrew-mason-the-unlikely-dealmaker/1#c29811638/|title=
The company offers one "Groupon" ("group coupon") per day in each of the markets it serves. The Groupon works as an [[assurance contract]] using ThePoint's platform: if a certain number of people sign up for the offer, then the deal becomes available to all;<ref name="tipping_point">{{cite news|url=http://www.reuters.com/article/newsOne/idUSTRE5592K720090610|title=Virtual "tipping point" leverages group deals|last=Cohen|first=Deborah|date=June 10, 2009|publisher=Reuters|accessdate=November 30, 2009}}</ref> if the predetermined minimum is not met, no one gets the deal that day.<ref name=twsDecR11/> This reduces risk for retailers, who can treat the coupons as [[quantity discount]]s<ref name=twsDecR11/> as well as [[sales promotion]] tools. Groupon makes money by keeping approximately half the money the customer pays for the coupon.<ref name=twsDecR11/><ref name="leverages">{{cite web|url=http://www.washingtontimes.com/news/2009/jul/08/site-leverages-power-of-group-purchases/|title=Site leverages power of group purchases|last=Boston|first=Gabriella|date=July 8, 2009|accessdate=November 30, 2009}}</ref> So, for example, an $80 massage could be purchased by the consumer for $40 and then Groupon and the retailer would split the $40. That is, the retailer gives a massage valued at $80 and gets approximately $20 from Groupon for it. And the consumer gets the massage, in this example, from the retailer for which they have paid $40 to Groupon. There are certain businesses to which Groupon will not offer its services, including shooting ranges, abortion clinics, plastic surgeons and strip clubs.<ref name="dealmaker">{{cite web|url=http://smallbusiness.aol.com/2010/08/09/groupons-andrew-mason-the-unlikely-dealmaker/1#c29811638/|title=
Groupon's Andrew Mason: The Unlikely Dealmaker|last=Williams|first=Geoff|date=August 9, 2010|accessdate=August 9, 2010}}</ref> Unlike [[classified advertising]], the merchant does not pay any upfront cost to participate,<ref name=twsDecR11/> Groupon collects personal information from willing consumers and then only contacts those consumers, primarily by daily email, who may possibly be interested in a particular product or service.<ref name=twsDecR11/> Groupon breaks into new markets by identifying successful local businesses, first by sending in an advance squadron of employees to research the local market; when it finds a business with outstanding reviews, salespeople approach it and explain the model, and use social marketing sites such as [[Facebook]] to further promote the idea.<ref name=twsDecR11/> Reflecting its focus on sales promotion, Groupon employs a sizable number of creative staff<ref name=atlantic>{{cite web|url=http://www.theatlantic.com/technology/archive/2010/12/forget-journalism-school-and-enroll-in-groupon-academy/68257/ |title=Forget Journalism School and Enroll in Groupon Academy |last=Weingarten |first=Elizabeth |work=The Atlantic.com }}</ref> who draft descriptions for the deals featured by email and on the website. Groupon's promotional text for the deals has been seen as a contributing factor to the popularity of the site.<ref name=atlantic />
Groupon's Andrew Mason: The Unlikely Dealmaker|last=Williams|first=Geoff|date=August 9, 2010|accessdate=August 9, 2010}}</ref> Unlike [[classified advertising]], the merchant does not pay any upfront cost to participate,<ref name=twsDecR11/> Groupon collects personal information from willing consumers and then only contacts those consumers, primarily by daily email, who may possibly be interested in a particular product or service.<ref name=twsDecR11/> Groupon breaks into new markets by identifying successful local businesses, first by sending in an advance squadron of employees to research the local market; when it finds a business with outstanding reviews, salespeople approach it and explain the model, and use social marketing sites such as [[Facebook]] to further promote the idea.<ref name=twsDecR11/> Reflecting its focus on sales promotion, Groupon employs a sizable number of creative staff<ref name=atlantic>{{cite web|url=http://www.theatlantic.com/technology/archive/2010/12/forget-journalism-school-and-enroll-in-groupon-academy/68257/ |title=Forget Journalism School and Enroll in Groupon Academy |last=Weingarten |first=Elizabeth |work=The Atlantic.com }}</ref> who draft descriptions for the deals featured by email and on the website. Groupon's promotional text for the 'deals' has been seen as a contributing factor to the popularity of the site, featuring a distinctive mix of thorough fact-checking and witty humor.<ref name=atlantic />


Owing to Groupon's market being primarily composed of young, educated, female customers,<ref>{{cite web|url=http://www.grouponworks.com/demographics |title=Have you met our subscribers yet? |publisher=GrouponWorks |date= |accessdate=March 29, 2011}}</ref><ref>{{cite web|author=Name * |url=http://jamiedunham.wordpress.com/2010/10/08/marketing-to-women-groupon-or-groupoff-10-facts-you-need-to-know/ |title=Marketing to Women: Groupon or Groupoff? 10 Facts You Need To Know &#124; The Lipstick Economy |publisher=Jamiedunham.wordpress.com |date=October 8, 2010 |accessdate=March 29, 2011}}</ref> the deals are often focused on the health, fitness and beauty markets.<ref>{{cite web
Owing to Groupon's market being primarily composed of young, educated, female customers,<ref>{{cite web|url=http://www.grouponworks.com/demographics |title=Have you met our subscribers yet? |publisher=GrouponWorks |date= |accessdate=March 29, 2011}}</ref><ref>{{cite web|author=Name * |url=http://jamiedunham.wordpress.com/2010/10/08/marketing-to-women-groupon-or-groupoff-10-facts-you-need-to-know/ |title=Marketing to Women: Groupon or Groupoff? 10 Facts You Need To Know &#124; The Lipstick Economy |publisher=Jamiedunham.wordpress.com |date=October 8, 2010 |accessdate=March 29, 2011}}</ref> the deals are often focused on the health, fitness and beauty markets.<ref>{{cite web

Revision as of 20:20, 2 June 2011

Groupon
Groupon logo
Type of site
Electronic commerce
Available inEnglish and others (for 27 countries)
HeadquartersChicago, IL
OwnerThePoint, Inc.
Created byAndrew Mason
RevenueUS$760 million[1]
URLgroupon.com
CommercialYes

Groupon (a portmanteau derived from "group coupon") is a deal-of-the-day website that features discounted gift certificates usable at local or national companies. Groupon was launched on November 2008, the first market for Groupon was Chicago, followed soon thereafter by Boston, New York City, and Toronto. As of October 2010, Groupon serves more than 150 markets in North America and 100 markets in Europe, Asia and South America and has amassed 35 million registered users.[3][4][5][6]

The idea for Groupon was created by now-CEO and Pittsburgh native[7] Andrew Mason.[8] The idea subsequently gained the attention of his former employer, Eric Lefkofsky, who provided $1 million in "seed money" to develop the idea. In April 2010, the company was valued at $1.35 billion.[9] According to a report conducted by Groupon's marketing association and reported in Forbes Magazine, which was reported by the Wall Street Journal, Groupon is "projecting that the company is on pace to make $1 billion in sales faster than any other business, ever".[7]

Groupon also owns several international operations, all of which were originally deal-of-the-day services similar to it, but then re-branded under the Groupon name after acquisition; these have included the European-based MyCityDeal (17 May 2010), the South American ClanDescuento (22 June 2010), the Singaporean Beeconomic.com, the Japanese service Qpod.jp, Russian Darberry.ru (both on 17 August 2010).[10] Groupon has recently bought the Indian deal-of-the-day website SoSasta.com and will be re-branding it soon as well.[11] The Groupon acquisitions of uBuyiBuy launched services under the Groupon name in Hong Kong, Singapore, the Philippines and Taiwan.[12] Groupon also acquired GroupsMore.com in Malaysia to expand its business there. [13] Prior to these acquisitions, Groupon had bought out the mobile technology company Mob.ly. Groupon is preparing for a $25 billion IPO in 2011.[14] ThePoint,inc., the predecessor to Groupon, bought the trademark [15] "GROUP-ONS" from its originator in February 2009 under terms which allows the originator and first registrant of the trademark to continue the use of this trademark.

In June 2011, Groupon filed with the SEC to riase up to $750 million in an initial public offering.[16]


Business model

The company offers one "Groupon" ("group coupon") per day in each of the markets it serves. The Groupon works as an assurance contract using ThePoint's platform: if a certain number of people sign up for the offer, then the deal becomes available to all;[17] if the predetermined minimum is not met, no one gets the deal that day.[7] This reduces risk for retailers, who can treat the coupons as quantity discounts[7] as well as sales promotion tools. Groupon makes money by keeping approximately half the money the customer pays for the coupon.[7][18] So, for example, an $80 massage could be purchased by the consumer for $40 and then Groupon and the retailer would split the $40. That is, the retailer gives a massage valued at $80 and gets approximately $20 from Groupon for it. And the consumer gets the massage, in this example, from the retailer for which they have paid $40 to Groupon. There are certain businesses to which Groupon will not offer its services, including shooting ranges, abortion clinics, plastic surgeons and strip clubs.[19] Unlike classified advertising, the merchant does not pay any upfront cost to participate,[7] Groupon collects personal information from willing consumers and then only contacts those consumers, primarily by daily email, who may possibly be interested in a particular product or service.[7] Groupon breaks into new markets by identifying successful local businesses, first by sending in an advance squadron of employees to research the local market; when it finds a business with outstanding reviews, salespeople approach it and explain the model, and use social marketing sites such as Facebook to further promote the idea.[7] Reflecting its focus on sales promotion, Groupon employs a sizable number of creative staff[20] who draft descriptions for the deals featured by email and on the website. Groupon's promotional text for the 'deals' has been seen as a contributing factor to the popularity of the site, featuring a distinctive mix of thorough fact-checking and witty humor.[20]

Owing to Groupon's market being primarily composed of young, educated, female customers,[21][22] the deals are often focused on the health, fitness and beauty markets.[23]

There are potential problems with the business model. For example, a successful deal could temporarily swamp a small business with too many customers, risking a possibility that customers will be unsatisfied, or that there won't be enough product to meet the demand.[7] Gap, a large clothing retailer, was able to handle 445,000 coupons in a national deal (although it experienced server problems at one point), but a smaller business could become suddenly flooded with customers.[7] One coffee shop in Portland was swamped with a stampede of over 1000 customers on the first day, according to one report.[24] In response to similar problems, Groupon officials state that 'deal' subscriptions should be capped in advance to a reasonable number.[7]

As of 2010, it is difficult for local merchants to get Groupon interested in agreeing to a particular deal. According to the Wall Street Journal, seven of every eight possible deals suggested by merchants were dismissed by Groupon.[7]

The site has recently launched a mobile application available on Wap, Android, Blackberry, iPhone and Windows Phone 7. It allows users to buy deals on their phones and retrieve them using the screen as a coupon.

In February 2011, Groupon Russia announced it would join the Russian Company Mail.ru in order to start offering deals on its social network Odnoklassniki. This way, users would be able to buy and share deals from Groupon on their profiles.

Geographic markets

Groupon serves many major geographic markets internationally including cites in the United States,[25] Canada, Taiwan, Brazil, Germany, Greece, France, the Netherlands, Belgium, the United Kingdom, India, Israel, Italy, Portugal, Spain, Puerto Rico, Japan, Poland, Turkey, Mexico, Peru, Chile, Colombia, South Korea, Sweden, Argentina, the United Arab Emirates, Norway, Romania, Singapore, Malaysia, Hong Kong, Mainland China, and Russia.

In Australia, development of Groupon has been slow owing to legal disputes between Groupon and an Australian company, Scoopon. Groupon now operates in Australia as "Stardeals" while the legal problems are worked out.[26]

On February 19, 2011 The Wall Street Journal reported that Groupon was preparing to launch in China.[27][28]

Groupon is also expanding into the MENA region with its launch of Groupon UAE on March 1, 2011.

Groupon New Zealand launched on 10th May 2011 in conjunction with local Facebook tourism hub Gotta Love NZ. The New Zealand market is already crowded with over 50 deal sites active.

Competitors

Worldwide, there are over 500 similar sites including over 100 in US.[7][9] However, by December 2010, only one competitor, named LivingSocial, has been described as a serious competitor; according to one estimate, it received an investment from Amazon of $175 million.[7] Other notable firms operating in the market include Xferral, BuyWithMe, Plum district, Jasmere.com, Groop Swoop, TownHog, and eWinWin.[29]

In January 2011, reports surfaced that Google was planning to launch a competing product, called Google Offers, following its failure to purchase Groupon for $6 billion.[30]

In April 2011, Facebook begins testing social-buying program‎. [31] This move by Facebook was considered a major blow to Groupon.[32]

There are also some similar websites which targets on specific markets, such as Campus Dibs and Unibuyhk.

Funding

New Enterprise Associates. Eric Lefkofsky and Brad Keywell are investors in Groupon.[citation needed]

In April 2010, Groupon raised $135 million from Digital Sky Technologies, a Russian investment firm.[33]

On December 29, 2010, Groupon's executive board approved a change to Groupon's certificate of incorporation that would permit the company to raise $950 million in venture capital funding, based on a valuation of $6.4 billion.[34]

Revenues

From January 2010 through January 2011, Groupon’s U.S. monthly revenues grew from $11 million to $89 million. Total 2011 U.S. revenues were an estimated $460 million. In February 2011 monthly revenue dropped to $62 million. Groupon’s 2011 estimated revenues are in the $3 billion to $4 billion range.[35]

History

Groupon made its first deal in October 2008 with a half-price offer for pizzas for the restaurant on the first floor of its building in Chicago.[7] There are reports that phone-staffers at Groupon also have ties to Chicago's improv-comedy scene.[7]

Buyout offers

In October 2010, Yahoo! was rumored to have offered over $3 billion to acquire Groupon.[36] On November 30, 2010, it was reported that Google offered $5.3 billion with a $700 million earnout to acquire Groupon and was rejected on December 3, 2010.[37] After the rejection of the Google/Groupon buy-out, Groupon was identified as a possible candidate for an initial public offering by 2013.[38]

Criticism

Groupon aired a controversial Super Bowl XLV advertisement in which actor Timothy Hutton begins by making a plea for the people of Tibet before delivering the punch line: "But they still whip up an amazing fish curry."[39] Critics of the ad took to several social media outlets[40] to argue that Groupon was joking about the plight of Tibetans to sell their services. The following day, Groupon responded by defending their commercial and their philanthropic stance.[41][42] The environmental organization Greenpeace praised Groupon's Super Bowl ads.[40][43] On 10 February 2011, Groupon's founder Andrew Mason apologized and pulled the ad.[44]

In March 2011, Eli R. Johnson filed a lawsuit in federal court against Groupon, based on a claim that the company issues "gift certificates" that are not allowed under the Credit Card Accountability Responsibility and Disclosure Act which prohibits retailers from setting expiration dates less than 5 years after a card is purchased.[45]

Responding to concerns about Donald Trump's possible run for the U.S. presidency, in April 2011 Groupon said "Enough consumers have contacted us to warrant ensuring that we don't place ads on the 'Apprentice' home page in the future." The company said the action was to distance itself from "political criticism", and that "it's avoiding intentionally upsetting a segment of our customers."[46]

References

  1. ^ Hickins, Michael (February 26, 2011). "Groupon Revenue Hit $760 Million, CEO Memo Shows". The Wall Street Journal.
  2. ^ "groupon.com - Traffic Details from Alexa". Alexa Internet, Inc. Retrieved 2011-05-30.
  3. ^ "Groupon About".
  4. ^ "Groupon Expands to New Markets in Florida". October 12, 2010.
  5. ^ "Groupon Prankster Mason Not Joking in Spurning Google". December 6, 2010.
  6. ^ "Groupon hits 50m Subscribers - Shopping site sensation". January 21, 2011.
  7. ^ a b c d e f g h i j k l m n o p Bari Weiss (December 18, 2010). "Groupon's $6 Billion Gambler". Wall Street Journal. Retrieved December 18, 2010. 30-year-old CEO Andrew Mason. He's on the cover of Forbes Magazine labelled "The Next Web Phenom." {{cite news}}: Italic or bold markup not allowed in: |publisher= (help)
  8. ^ Coburn, Marcia Froelke (July 14, 2010). "The Real Deal". Retrieved July 14, 2010.
  9. ^ a b Steiner, Christopher (August 30, 2010). "Meet The Fastest Growing Company Ever". Forbes. Retrieved November 23, 2010.
  10. ^ "Groupon Goes International, Buys Japanese and Russian Clones". Mashable. Retrieved August 17, 2010.
  11. ^ "Groupon acquires India's e-commerce portal SoSasta.com". The Times Of India. Retrieved January 17, 2011.
  12. ^ Efrati, Amir (December 1, 2010). "Google Plots Move From Search to Sales". The Wall Street Journal.
  13. ^ "Groupon Expands in Southeast Asia, now Offering Deals in Malaysia". Retrieved January 25, 2011.
  14. ^ Saba, Jennifer (March 17, 2011). "Groupon worth $25 billion? Nope: source". Reuters. Retrieved March 29, 2011.
  15. ^ "Groupon trademark purchase from Girlawhirl,Inc". United States Patent and Trademark Office. May 29,2009. {{cite web}}: Check date values in: |date= (help)
  16. ^ "Groupon files for a $750 million IPO". Renaissance Capital. 02 June 2011. Retrieved 02 June 2011. {{cite news}}: Check date values in: |accessdate= and |date= (help)
  17. ^ Cohen, Deborah (June 10, 2009). "Virtual "tipping point" leverages group deals". Reuters. Retrieved November 30, 2009.
  18. ^ Boston, Gabriella (July 8, 2009). "Site leverages power of group purchases". Retrieved November 30, 2009.
  19. ^ Williams, Geoff (August 9, 2010). "Groupon's Andrew Mason: The Unlikely Dealmaker". Retrieved August 9, 2010.
  20. ^ a b Weingarten, Elizabeth. "Forget Journalism School and Enroll in Groupon Academy". The Atlantic.com.
  21. ^ "Have you met our subscribers yet?". GrouponWorks. Retrieved March 29, 2011.
  22. ^ Name * (October 8, 2010). "Marketing to Women: Groupon or Groupoff? 10 Facts You Need To Know | The Lipstick Economy". Jamiedunham.wordpress.com. Retrieved March 29, 2011.
  23. ^ Vojtěch Bednář (May 29, 2010). "Česko je pro nás ráj. Lidi zajímá jen cena".Template:Cs icon
  24. ^ Ylan Q. Mui (September 17, 2010). "Some businesses are victims of social-couponing (Groupon, Living Social) success". Washington Post. Retrieved December 18, 2010. What Posies was not prepared for was the overwhelming response. Nearly 1,000 people... {{cite news}}: Italic or bold markup not allowed in: |publisher= (help)
  25. ^ "Groupon.com". Groupon.com. Retrieved March 29, 2011.
  26. ^ andrew (January 4, 2011). "Groupon.com". Groupon.com. Retrieved March 29, 2011.
  27. ^ Loretta Chao (February 19, 2011). "Groupon Appears to Be Gearing Up for China Market". Wall Street Journal. Retrieved February 20, 2011.
  28. ^ Geller, Martinne (February 20, 2011). "Reuters.com". Reuters.com. Retrieved March 29, 2011.
  29. ^ "Social buying boom attracts big-name investors". BBC News Website. December 28, 2010.
  30. ^ "Google Plans 'Google Offers' To Take On Groupon". Forbes Website.
  31. ^ http://www.google.com/url?sa=t&source=news&cd=1&ved=0CCgQqQIwAA&url=http%3A%2F%2Fnews.cnet.com%2F8301-1023_3-20057334-93.html&ei=2222TaHAHcnEswbnu7y6DQ&usg=AFQjCNFs0TZ0uqdVqDjxnjDws81g86rYiw&sig2=NBNJjCbV-MreDrzaQ9yH4Q
  32. ^ http://techcrunch.com/2010/11/03/facebook-deals/
  33. ^ Kim-Mai Cutler, VentureBeat. "Groupon Raises $135M from DST, signaling social buying comes of age." April 19, 2010.
  34. ^ "Groupon Disses Google: Groupon to Raise $950 Million in Wake of Buyout Attempt". December 29, 2010.
  35. ^ Erick Schonfeld, techcrunch.com. "Exclusive Data On Groupon’s U.S. Revenues And February Falloff." March 23, 2011. Retrieved March 23, 2011.
  36. ^ "Getting To the Bottom of The Crazy Yahoo-Groupon Rumors". Oct 16, 2010.
  37. ^ Efrati, Amir (December 1, 2010). "Google in Talks to Buy Deal Site Groupon". The Wall Street Journal.
  38. ^ "Businessinsider.com". Businessinsider.com. December 10, 2010. Retrieved March 29, 2011.
  39. ^ By Jo Kent, CNN (January 21, 2011). "Edition.cnn.com". cnn.com. Retrieved March 29, 2011. {{cite news}}: |author= has generic name (help)
  40. ^ a b By Doug Gross, CNN (February 8, 2011). "cnn.com". Edition.cnn.com. Retrieved March 29, 2011. {{cite news}}: |author= has generic name (help)
  41. ^ (AFP) – Feb 7, 2011 (February 7, 2011). Google.com http://www.google.com/hostednews/afp/article/ALeqM5hfx6XZsFw7cw-8pi7MEsl4B43wGw. Retrieved March 29, 2011. {{cite web}}: |url= missing title (help)CS1 maint: multiple names: authors list (link) CS1 maint: numeric names: authors list (link)
  42. ^ andrew (February 7, 2011). "Groupon.com". Groupon.com. Retrieved March 29, 2011.
  43. ^ "Greenpeace.org". Greenpeace.org. February 7, 2011. Retrieved March 29, 2011.
  44. ^ andrew (February 10, 2011). "Groupon.com". Groupon.com. Retrieved March 29, 2011.
  45. ^ Lansu, Michael (March 2, 2011). "Groupon sued over deal expiration dates". Chicago Sun Times. Retrieved Mar 11,2011. {{cite news}}: Check date values in: |accessdate= (help); Italic or bold markup not allowed in: |publisher= (help)
  46. ^ "Groupon Pulls Ads From Donald Trump's 'Apprentice' Website". The Hollywood Reporter. April 29, 2011. Retrieved May 3, 2011.
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