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Groupon

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Groupon
Groupon logo.
Type of site
Electronic Commerce
Available inEnglish and others (for 27 countries)
HeadquartersChicago, IL
OwnerThePoint, Inc.
Created byAndrew Mason
RevenueUS$350 million (2010 est.)[1]
URLhttp://www.groupon.com
CommercialYes
RegistrationNone

Groupon is a deal-of-the-day website that is localized to major geographic markets in the United States, Canada, Brazil, Germany, France, the United Kingdom, Italy, Portugal, Spain, Japan, Poland,Turkey Mexico and Romania. Launched in 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.[2][3]

The idea for Groupon was created by now-CEO and Pittsburgh native[4] Andrew Mason.[5] The idea subsequently gained the attention of his former employer, Eric Lefkofsky, who provided $1 million in "seed money" to develop the idea. Groupon is growing fast with a projected revenue of $500 million for 2010. At just under 2-years old in April 2010, the company was valued at $1.35 billion.[6] 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".[4]

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 Japanese service Qpod.jp, and Russian Darberry.ru (both on 17 August 2010).[7] Groupon has recently bought the Indian deal-of-the-day website SoSasta.com and will be re-branding it soon as well.[8] Prior to these acquisitions, Groupon had bought out the mobile technology company Mob.ly.

Business model

The company offers one "Groupon" 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;[9] if the predetermined minimum is not met, no one gets the deal that day.[4] This reduces risk for retailers, who can treat the coupons as quantity discounts[4] as well as sales promotion tools. Groupon makes money by getting a cut of the deal from the retailers.[4][10] There are certain businesses that Groupon will not offer its services to, including shooting ranges, abortion clinics, plastic surgeons and strip clubs.[11] Unlike classified advertising, the merchant doesn't pay any upfront cost to participate.[4] And the business model works to make sure that the offer is made to the right customers who are interested in a particular product or service.[4] Groupon breaks into new markets by identifying successful local businesses first by sending in an advance squad 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.[4] Reflecting its focus on sales promotion, Groupon employs a sizable amount of creative staff[12] 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.[12]

Due to Groupon's market being primarily composed of young, educated, female customers,[13][14] the deals are often focused on the health, fitness and beauty markets.[15]

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.[4] A large store such as the GAP can 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.[4] One coffee shop in Portland was swamped with a stampede of over 1000 customers on the first day, according to one report.[16] In response to similar problems, Groupon officials state that 'deal' subscriptions should be capped in advance to a reasonable number.[4]

As of 2010, it's difficult for local merchants to get Groupon interested in vetting a particular deal; according to the Wall Street Journal, seven of every eight possible deals suggested by merchants were dismissed by Groupon.[4]

Competitors

In North America, there have been 200 similar sites that have sprung up with some sites even copying the color, font, and logo.[citation needed] Worldwide, there are over 500 similar sites including over 100 in US.[4][6] However, by December 2010, only one competitor named Living Social has been described as a serious competitor; according to one estimate, it received an investment from Amazon of $175 million.[4] Other notable firms operating in the market include BuyWithMe, Weforia (Powered by Yellowbook), Groop Swoop, Groupalia, TownHog, Agenzy.com and eWinWin.[17] Some sites, such as Dealradar, Dealery, Yipit, and SocialDealMap {{citation}}: Empty citation (help) collate deals from many other websites.

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.[18]

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.[19]

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.[4] There are reports that phone-staffers at Groupon also have ties to Chicago's improv-comedy scene.[4]

Buyout offers

In October 2010, Yahoo! was rumored to have offered over $3 billion to acquire Groupon.[20] 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.[21] After the rejection of the Google/Groupon buy-out, Groupon was identified as a possible candidate for an initial public offering by 2013.[22]

References

  1. ^ Arrington, Michael (April 15, 2010). "The Rest Of The Details On That Monster Groupon Financing".
  2. ^ "Groupon Expands to New Markets in Florida". October 12, 2010.
  3. ^ "Groupon Prankster Mason Not Joking in Spurning Google". December 6, 2010.
  4. ^ 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 2010-12-18. 30-year-old CEO Andrew Mason. He's on the cover of Forbes Magazine labelled "The Next Web Phenom." {{cite news}}: Check date values in: |date= (help); Italic or bold markup not allowed in: |publisher= (help)
  5. ^ Coburn, Marcia Froelke (July 14, 2010). "The Real Deal". Retrieved 14 July 2010.
  6. ^ a b Steiner, Christopher (August 30, 2010). "Meet The Fastest Growing Company Ever". Forbes. Retrieved 23 November 2010.
  7. ^ "Groupon Goes International, Buys Japanese and Russian Clones". Mashable. Retrieved 17 August 2010.
  8. ^ "Groupon acquires India's e-commerce portal SoSasta.com". Retrieved 17 January 2011.
  9. ^ Cohen, Deborah (June 10, 2009). "Virtual "tipping point" leverages group deals". Reuters. Retrieved 30 November 2009.
  10. ^ Boston, Gabriella (July 8, 2009). "Site leverages power of group purchases". Retrieved 30 November 2009.
  11. ^ Williams, Geoff (August 9, 2010). "Groupon's Andrew Mason: The Unlikely Dealmaker". Retrieved 9 August 2010.
  12. ^ a b Weingarten, Elizabeth. "Forget Journalism School and Enroll in Groupon Academy". The Atlantic.com.
  13. ^ Have you met our subscribers yet? | GrouponWorks
  14. ^ Marketing to Women: Groupon or Groupoff? 10 Facts You Need To Know | The Lipstick Economy
  15. ^ Vojtěch Bednář (29 May 2010). "Česko je pro nás ráj. Lidi zajímá jen cena".Template:Cs icon
  16. ^ Ylan Q. Mui (September 17, 2010). "Some businesses are victims of social-couponing (Groupon, Living Social) success". Washington Post. Retrieved 2010-12-18. 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)
  17. ^ "Social buying boom attracts big-name investors". BBC News Website.
  18. ^ Kim-Mai Cutler, VentureBeat. "Groupon Raises $135M from DST, signaling social buying comes of age." April 19, 2010.
  19. ^ "Groupon Disses Google: Groupon to Raise $950 Million in Wake of Buyout Attempt". December 29, 2010.
  20. ^ "Getting To the Bottom of The Crazy Yahoo-Groupon Rumors". Oct 16, 2010.
  21. ^ "Google in Talks to Buy Deal Site Groupon".
  22. ^ http://www.businessinsider.com/google-groupon-deal
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