Groupon is a ‘Deal-of-the-day’ website that features discounted gift certificates usable at local or national companies that was launched in November 2008. The first market for Groupon was Chicago, followed soon thereafter by Boston, New York City, and Toronto. By October 2010 Groupon served more than 150 markets in North America and 100 markets in Europe, Asia and South America and had over 35 million registered users.
A sum of $1 million was invested to develop the idea and in April 2010, the company was valued at $1.35 billion. According to a December 2010 report conducted by Groupon’s marketing association and reported in Forbes Magazine and the Wall Street Journal, Group was projecting that the company is on a pace to make $1 billion in sales faster than any other business, ever. However, a report from Forrester Research in October 2011 suggested that the Groupon business model was a “disaster” and that the firm had become an example of “how fast an Internet darling can fall”.
Groupon’s business model is designed for small businesses that need to attract long-terms customers in order to grow hence Groupon functions as an intermediate where two streams are being targeted; merchants & customers. A commission fee is charged to the small businesses which is the main stream of income interim these merchants offer steep discounts for a product or service to the consumer who pays Groupon to secure the deal.
Investors are clearly happy after Groupon’s (GRPN) stock jumped nearly 14% after the board fired CEO Andrew Mason. Mason has been under pressure due to poor earnings and a falling stock price. Since its IPO (Initial Public Offering), Groupon’s stock is down more than 82%. Not quite the return shareholders were expecting. So with Mason out, the market seems to believe Groupon has a fighting chance given the sharp rise up after the announcement however we reckon Groupon’s business model to be the...
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