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Groupon is a group-based social e-commerce buying service that launched last year. While many retailers are struggling to survive in this economy, Groupon has seen exponential growth.

With $4.8 million in funding from New Enterprise Associates and $1 million from an angel investor, Groupon reached profitability in June. 

The company offers daily deals on a variety of services offered from different retailers. Groupon. The savings are group focused — if enough people sign up for an offer, everyone gets the deal. If there aren’t enough people, no one gets it. Groupon collects payment and passes it on, minus their fee, to the business.

Today the company announced $30 million in series B funding that included new investor Accel Partners. I caught up with Andrew Mason, Groupon's founder, to talk about what sets his company apart from traditional coupon sites, how the company came about and what's up next at Groupon. 

How did Groupon get started?
Groupon started in November 2008 as part of The Point, a platform for collective action. People started using The Point to organize group purchases (for example, magazine subscriptions). We thought it was a powerful use of the site, and decided to explore it further by building Groupon to use group buying to create a win-win for local businesses and their customers.

How does Groupon work?
There is a tipping point to every deal – a certain number of people who must opt-in to activate the promotion. This makes the Groupon experience as social as the deals we offer: send to friends and reap the benefits. We invest heavily in ensuring that the entire Groupon experience feels "too good to be true," hiring researchers and fact checkers to make sure we're only featuring stuff our customers will love, and a large customer service team so our customers can talk to Groupon whenever they wish.

Coupons have become a big business again with the recession, both online and offline. Do you think that will continue when the economy picks up?

Coupons are useful when you need a deal to make ends meet, but Groupon uses the discount to get consumers to try something new instead of spending their money on the same old thing. I think you can decouple Groupon’s fortunes from those of couponing. We use discounts to make risks more attractive. Coupons will be less relevant when consumers have more money at their disposal, but Groupon will stay in demand as an important guide to the best things to see and do in cities across the U.S. We like to think that we have taken coupons to a whole new level and see ourselves much more as a city guide than we do a deal site.

So where do you see yourself in comparison to other coupon sites?
From the beginning, we've maintained a very high standard for the businesses and deals that we're willing to feature. The quality of our deals is what separates us from deal sites that came before. Groupon deals rarely have restrictions; it’s vital consumers trust us and believe that if the deal is on Groupon, it’s worth it.

You've seen pretty amazing growth over the past few months. What do you attribute that to?
Several factors have contributed to the steady growth of Groupon. We have extremely high standards for the quality of deals on our site. The daily deals also have a broad appeal. There’s something for everyone, whether you’re shopping for yourself or as a gift. We've seen incredible enthusiasm among customers and merchants. Fans of Groupon are advocates of the site and continue to help us reach new heights. Also, we place a premium on customer service, from our help line to quick online response to customer issues. Happy customers refer friends.

How does Groupon work with retailers to create its deals?
Our general approach is to make it as easy as possible for business owners. We help businesses navigate the new world of social media and Internet marketing in an approachable, creative way. An appearance on Groupon validates these businesses as a cool part of their community. It’s an alternative to traditional advertising, where you pay up-front, hope for the best and typically are disappointed. Successful Groupon partnerships can deliver more customers in one day than many businesses see in a quarter.

Groupon works with each business to develop custom deals in line with their sales goals, whether it’s selling extra inventory or meeting a certain conversion rate. A Groupon deal always seems too good to be true, is available only on our site, and guarantees our partners a minimum number of customers in exchange for an unheard-of discount. We’re selective in the businesses and deals we choose to feature. We have a team of researchers and fact checkers to make sure we're only including stuff our customers will love.

The site is booming in popularity among business owners. In Chicago, for example, we have a backlog of 120 deals waiting to be featured. 97% of our partners would like to be featured again.

What are some of the most interesting deals you've seen on Groupon?
It really depends on the consumer. We offer deals from businesses that rarely (or never) discount their goods. Some of my favorites are the $100 off skydiving jump (1,650 bought), the $40 one-year membership to the Art Institute of Chicago (4,913 bought), and $95 for $225 towards custom clothes and suits at Balani Custom Clothiers (847 bought).

Tickets to shows like the Lyric Opera or the ballet are popular on Groupon among an audience who may not normally consider attending. Also, we've sold out event venues when others in the neighborhood have struggled, for example the rooftop viewing decks across from Wrigley Field.

Groupon has seen a lot of growth in its year of existence. What's on tap for 2010?
Groupon will expand its presence to 30 cities by the end of 2009, and we plan to expand to 80 markets total by the end of 2010.

Meghan Keane

Published 2 December, 2009 by Meghan Keane

Based in New York, Meghan Keane is US Editor of Econsultancy. You can follow her on Twitter: @keanesian.

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cm

I bought my first DVD player with letsbuyit.  Which raised (and then spent) even more money than Groupon has gotten its mits on.

Theirs is of course a better model, but still a bit too hassley for most people I reckon.

over 6 years ago

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Peter

Since they got another $135m in funding recently, I would say Groupon are doing OK for themselves! The TechCrunch blog also estimates that they are pulling in $40,000 per deal which would make them a $100m a year easily. However, they are just still a list and a brand and other people are already looking to create their own groupon clones and try out the concept in their own country and cities.

about 6 years ago

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James

Groupon must really be a mixed blessing for a lot of businesses, given how little revenue most of them receive from Groupon and how much strain a Groupon can create in a short period of time. It's great for consumers (I must use them once a month) but I'd be very curious to hear if any businesses have had less than 100% positive Groupon experiences.

about 6 years ago

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Wayne

Great post and great business concept. I don't think Groupon is right for all types of businesses, but I know here in Boston the restaurants that I have spoken with who have used Groupon echo the fact that the coupons got people in the door and that they would  use them again.

almost 6 years ago

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Contus

As a big time Groupon user, I can tell you that the reasons you listed are the reasons we keep coming back! Great savings and very user friendly.

over 5 years ago

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donna

how do i get refund

over 4 years ago

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Ajay

Groupon is a middleman making money. Guess who pays groupon? You, the consumer and the business owner. I'd rather pay the business owner the money and get better quality service.

about 4 years ago

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