Groupon is basically a group buying website where huge discounts are offered on deals in specific cities, deals such as 50% off local goods, services or even 50% off a stated meal at a popular local restaurant. The idea behind Groupon is simple, they provide deals to their prospective shoppers that allow them to buy merchandise and services at a significant discount (usually 50% or more) to the retail price. If enough of the shoppers buy the Groupon, the deal is “on” for that day. This makes it a win-win situation, you get the discount and the store or company gets enough customers to make it worth it.
So how does Groupon make profit: Groupon makes money by taking a portion of the money that the users spend on the Groupon (usually around 50%). The diagram below depicts a simple Groupon Business Model:
Should Groupon sell out to Google?
Walking away from this offer is a gigantic mistake .In my opinion I feel Groupon made a rather dumb decision. $ 6,000,000,000 is a lot of money for a company with little brand equity. They should've taken the money and ran. Google was paying a huge premium for a company that I feel has limited upside, and a lot of copycats are coming out everywhere, they had their chance to cash out. Google is a shrewd company, but $$$6Billion is a pretty shocking offer.
Plus, Groupon isn't a very good product. Every organization with a local sales force (for example, newspaper) can replicate this service quickly and effectively. Smaller entrants will nibble away at Groupon’s niche, and will muddy the water for Groupon among the all-important B2B market.
I've also given their Iphone/Ipad app a try a couple times, but there is rarely anything worth taking advantage of. The restaurants/services that are going to offer these huge discounts usually aren't worthwhile in the first place.
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