Groupon
Groupon is a publicly traded online marketplace founded in 2008 and headquartered in Chicago, Illinois. It was created to offer consumers discounted goods and services through a model combining group buying and coupons, allowing users to access deals for local businesses, travel, entertainment, and more. Founded by Andrew Mason, Groupon quickly gained popularity, becoming one of the fastest-growing companies by 2010. The site expanded rapidly beyond Chicago to numerous cities in the U.S. and internationally, attracting attention and investment.
Despite its initial success, Groupon faced challenges in the following years, including competition and internal issues, leading to a decline in stock value and multiple executive changes. The company restructured its business model, shifting focus from daily deals to a broader local e-commerce strategy. As of 2023, Groupon has continued to adapt, although it has seen a decrease in revenue. The company has also implemented a hybrid work model and streamlined operations to cut costs, emphasizing local opportunities and travel experiences. Overall, Groupon has made a significant impact on e-commerce and continues to navigate a changing business landscape.
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Groupon
- Date Founded: 2008
- Industry: Electronic commerce
- Corporate Headquarters: Chicago, Illinois
- Type: Public
Overview
Groupon is a publicly traded global online marketplace headquartered in Chicago, Illinois. The company also has several national and international offices. Groupon, a blending of the words group and coupon, works with merchants worldwide to provide discounted goods and services to its subscribers.
Consumers can subscribe to Groupon’s services through its website, www.groupon.com. They can purchase offers for things to do, places to see, dining venues, and items to buy. The company enables consumers to find discounted rates for local businesses, travel destinations, entertainment, products, and more. In addition, it works with businesses to attract customers and grow their companies.
The brainchild of Northwestern graduate Andrew Mason, the company was born from an idea for a business that offered consumers deals from various vendors. Branded Groupon, the company was incorporated in 2008. It expanded very quickly, becoming the fastest-growing company ever by 2010. Groupon began trading publicly in 2011 on the NASDAQ stock exchange under the ticker symbol GRPN. Despite initial success, the company experienced difficulties later in the 2010s and into the 2020s.
History
Around 2006, Andrew Mason came up with an idea for an online project that examined popular topics of the times, such as healthcare and war, while he was working for a Chicago firm. His boss at the time, Eric Lefkofsky, took an interest in his idea and invested $1 million in the form of an angel capital investment to get the website up and running.
The Point website was launched in 2007 to organize people interested in a common cause. The site quickly garnered attention for its interesting campaigns. One brought together a group that wanted to construct a dome over Chicago to keep the city warm. The campaigns also captured the attention of additional investors.
At the urging of Lefkofsky, Mason helped to morph the Point into a group-buying website that organized a crowd of people interested in purchasing a particular product at a discount. Mason began to offer readers different deals of the day from various companies; the deals only would be honored, or "tip," if a specific number of people bought them. The Point was changed to Getyourgroupon.com, which became Groupon in November 2008. Its first deal was a discount to an establishment located in the same office building.
Within months, Mason had expanded Groupon’s reach outside of Chicago to cities such as Boston and New York and offered deals in those areas. Groupon continued to grow, mostly by ads placed on social media sites and word-of-mouth from subscribers. It helped consumers and businesses—especially small businesses—who wanted to establish their companies, services, and products in the marketplace.
While Groupon was the first of its kind, its business model was easy to duplicate by other companies. Hundreds of similar sites began to spring up all over the globe. One of these was the competitor site LivingSocial, which launched in mid-2009.
Groupon continued to grow by offering deals tailored to specific areas. It also branched out into global markets. By 2010, the company had several thousand employees and established itself in numerous cities across the United States and more than a dozen countries. Mason acted as the company’s chief executive officer (CEO), but he worked closely with Lefkofsky, who served on the board during the business's day-to-day operations. Mason was featured in various media outlets, and Forbes deemed Groupon on the rise to become one of the fastest-growing companies in history. Groupon eventually added Rob Solomon of Yahoo! as chief operating officer (COO) around this time.
In mid-2010, Yahoo! offered to purchase Groupon, but the deal was rejected. Google made the next offer, but Groupon dismissed this offer as well. Groupon then purchased its German competitor CityDeal. Things began to change at the company after this time. The lax culture that existed there became more focused and revenue-driven. Talks began about an initial public offering (IPO).
Several company executives began to leave. Solomon left and was replaced by Google executive Margo Georgiadis; however, a few months later, she also left the company. Next, Groupon lost its head of corporate communications. Mason and Lefkofsky continued to ensure employees and investors that the company was not in trouble.
As things seemed to look down for the company, it finally began to offer its IPO in 2011 at a valuation of $12.65 billion ($20 per share). However, problems continued to arise within the company, such as accounting issues related to the ire of the Securities and Exchange Commission. Numerous competitors also hampered the company’s bottom line and dissuaded investors from trusting Groupon’s viability. By February 2013, Groupon’s stock was worth less than $5, and the company made a huge change by firing Mason. Shares continued to drop (as low as $2.50 at the end of 2015), and the company faced layoffs. It also pulled out of several countries in 2015.
The company began to reorganize its business model to restructure itself. It shifted its focus from daily deals to business based on local e-commerce. This involved shifting away from email and restructuring and redesigning the website so that users could search in a virtual marketplace of deals. Groupon chose Rich Williams from Amazon to serve as COO in June 2015 and then named him CEO that November. At this time, Groupon was valued at just less than $2 billion.
In 2016, Groupon was able to purchase its former rival, LivingSocial, for a relatively low price. The following year, the company announced the launch of Groupon+, a service through which users earn a percentage of the value of the deal they purchase with their credit cards back to be credited to their account. As part of this initiative, the company stressed general efforts to move further away from the voucher system. In 2020, Groupon's CEO and COO stepped down, allowing Kedar Deshpande to take the CEO position. In 2022, Groupon's total revenue was $599.1 million, down 38 percent. In 2023, the company announced another CEO transition, as Dusan Senkypl, the Pale Fire Capital founder, took over as interim CEO in March and was appointed permanent CEO in May 2024. Still, Groupon’s annual revenue in 2023 was $514.91 million, representing another 14 percent decrease. These numbers reflected the company’s ongoing challenges.
Impact
At a time when the US economy was experiencing a downturn, Groupon was able to capitalize by offering consumers deals on purchases. The company’s business strategy proved popular with the budget-minded, helping it to grow. Groupon became one of the fastest-growing companies ever, reaching its $1 billion valuation in 2010—just less than two years after its launch. While it experienced several ups and downs since its inception, Groupon remained a viable competitor in the e-commerce marketplace. Additionally, the popular site spawned many other businesses that copied its business model. Despite ongoing challenges such as declining revenue, Groupon continued to restructure and streamline operations to meet these challenges in the late 2010s and 2020s. The company downsized its office space and moved to a hybrid work model to cut costs. The company also moved toward an emphasis on local opportunities and travel experiences within North America.
Bibliography
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