Groupon is a website that offers consumers the opportunity to take advantage of limited quantity pricing deals. A common example of a Groupon offer is the option to pay $10 to receive a voucher worth $20 at a local restaurant. Each of these deals has an expiration date, and customers are typically limited to only one voucher per deal.

Groupon's History

Groupon was developed by CEO Andrew Mason in 2008, and he received $1 million from Eric Lefkofsky to bring his vision to life. By April 2010, Mason's brainchild was being hailed by the media and was worth an estimated $1.35 billion. By the end of 2010, Mason had been featured on the cover of Forbes magazine, and industry analysts were predicting that Groupon had the ability to reach $1 billion in sales faster than any other company in history. On November 4, 2011, Groupon had their initial public offering (IPO). Although the shares were originally set at $20, they actually began trading at $28 when the stock market opened that morning. Groupon only offered 35 million shares during their IPO, and this contributed to the sales price.

Business Model

Groupon operates by offering various deals in markets around the world for a specified period of time. In order to make a profit, the company splits the money that is paid for each of the vouchers. In other words, if a restaurant offers a $10 voucher that is good for $20 worth of food, Groupon receives approximately $5 per voucher.

One of the features that makes Groupon so attractive to business owners is that they do not have to pay anything upfront to be featured on the site. Instead, approved merchants will benefit from the exposure that Groupon provides for only the cost of giving their consumers a discounted product or service. However, because Groupon's success is based on the viability of the offers that they list, the company typically turns down the vast majority of listings that local area merchants suggest.

Business Plans

Groupon continues to branch into new countries, and they also continue to purchase existing websites, including and MyCityDeal. Each website is given a makeover to welcome it into the Groupon brand, and the company aggressively seeks out merchants that have quality offers. Between these new acquisitions and Groupon's smartphone application, the company is attempting to expand both its reach and its bottom line.

Financial Woes

Although the website is quite popular, it has had financial issues. In fact, Groupon's very first earnings release after the company went public showed a loss of $9.8 million. As if this was not bad enough, the company later revised its initial earnings release and announced that they had actually taken in $14.3 million less in revenue than originally reported. These issues caused a ripple effect that greatly damaged the value of Groupon's stock. By September 5, 2012, Groupon's stock had plummeted from a high value of $28 down to only $4.18 per share.

Issues with Small Business Owners

Several small business owners have complained that Groupon not only does not help them gain new customers, but that it actually costs them so much money that it is difficult to stay in business. In fact, the issues that companies have faced after offering a deal on Groupon are so severe that a survey in January 2012 indicated that over half of its merchants were not planning to use the website again. Because of these issues, many industry analysts predict that Groupon's model will eventually evolve to a point where only large businesses and subscription based services, including yoga and dance classes, will be featured on a regular basis.

Geographic Markets

Despite Groupon's financial problems and complaints from previous merchants, the U.S. based site ranks in the top 100 websites for traffic in the country. Groupon has also expanded into 44 countries and 500 markets.