Groupon: Helping Consumers with Purchase Decisions
University of Chicago graduate student Andrew Mason was in a rut. “There’s so much to do in Chicago,” he explains, “but I found myself going to the same movie theaters and restaurants.” To help people like him try new places, Mason started a website that offered coupons to large groups. The result was Groupon, a company that offers “group coupons” in deal-of-the-day offerings for local or national businesses. Consumers love the concept, buying everything from restaurant certificates, to yoga lessons, to tickets to a museum exhibit. “We think the Internet has the potential to change the way people discover and buy from local businesses,” says Mason.
THE COMPANY AND GROUPON CONCEPT
Mason started with a website called ThePoint.org, which was designed to organize campaigns, protests, boycotts, and fund-raising drives for important social issues. ThePoint was not successful but it provided the concept of making offers that are only carried out if enough people commit to participate in them. With that idea Mason launched Groupon in October 2008 with a two-pizzas-for-the-price-of-one offer at the Motel Bar, located in the same building where ThePoint rented space. The concept quickly grew in Chicago and Groupon expanded into other U.S. cities and then into other countries. Today Groupon is available in 375 American cities and 48 countries, and its subscriber base has grown from 400 in 2008 to 200 million today. In its fourth full year of operation, Groupon generated $5.4 billion in gross billings.
Part of Groupon’s success is the simplicity of its business model—offer subscribers at least one deal in their city each day. The unique aspect of the concept is that a certain number of people need to buy into the offer before the coupon discount is valid. Approximately 95 percent of Groupon offers “tip,” or reach the number