By: Kaci Cox
Groupon is a relatively new website that offers one Groupon (group- coupon) per day in each one of its markets. It was first created and tested in the Chicago market in November 2008. Today Groupon has over 150 markets in North America and another 100 markets in Europe, Asia and South America. 35 million people are now registered with Groupon.
The website is basically a deal-of-the-day service. How the business model works is actually quite simple and is adequately shown easily accessible on the main Groupon website as well as on YouTube.
How it works: the company offers one Groupon (coupon) per day in each market and if a certain number of people sign up for the offer (ranges from 30-500) than the deal becomes available to all. However if the minimum sign ups is not met than no one gets the deal and no one is charged. Deals are created this way in order to reduce risk for retailers as these coupons are treated like quantity discounts. Groupons are usually offered at 50% of retailer price to the consumer. Once the Groupons are sold then the retailer and Groupon split the money paid for the Groupon. For example If Pilates are offered at $70 Pilate’s class valued at $140 for the consumer, than Groupon and the class would split the $70 dollars
Groupon has also built a strong relationship with social media websites such as Facebook and Twitter. These social networks have provided a fast widespread tool for consumers to communicate and share deals in order to meet the minimum quote the deal to be on. Social media has allowed people to only observe the internet but to also participate. Social media has created the perfect time and opportunity for Groupon’s ultra success.
The company as of recently has become quite controversial and infamous in popular culture. During the Super Bowl XLV Groupon aired commercials featuring famous celebrities drawing on the sadness of Tibetan culture, clear cutting of the Brazilian rain forest, and the dwindling whale population then paired with abrupt sarcasm illuminating on their specific “deal.” Some of the commercials of reached over 300,000 hits on YouTube!
Controversy, social media, interactive online use, and great deals seem to have led to the golden ticket of Groupon. As of April 2010 the company was estimated to be valued at $1.35 billion, and Forbes Magazine ever reported the company was on track to make $1 billion in sales faster than any other business ever. Yahoo and Google have already made multi-billion dollar offers to buy the company, but they have so far been denied.